Question

X, Y and Z are partners sharing profits in the ratio of 4 : 3 : 2. Their Balance Sheet as at 31st March, 2018 stood as follows:
Y having given notice to retire from the firm, the following adjustments in the books of the firm were agreed upon:
(a) That the Land and Building be appreciated by 10%.
(b) That the Provision for Doubtful Debts is no longer necessary since all the debtors are considered good.
(c) That the stock be appreciated by 20%.
(d) That the adjustment be made in the accounts to rectify a mistake previously committed whereby Y was credited in excess by ₹ 810, while X and Z were debited in excess of ₹ 420 and ₹ 390 respectively.
(e) Goodwill of the firm be fixed at ₹ 5,400 and Y’s share of the same be adjusted to that of X and Z who were going to share in the ratio of 2 : 1.
(f) It was decide by X and Y to settle Y’s account immediately on his retirement.
You are required to show:
(i) Revaluation Account
(ii) Partner’s Capital Accounts and
(iii) Balance Sheet of the firm after Y’s retirement.

Answer 1

Y's share of goodwill is to be distributed between X and Z in their =2 : 1(Gaining Ratio)

Step by Step Explanation:

Adjustment of goodwill

X : Y : Z = 4 : 3 : 2( Old ratio)

Y retires from the firm.

Gaining Ratio = 4 : 2 =2 : 1

Goodwill of the firm =Rs. 5,400

Ys Goodwill = 5,400×$\frac{3}{9}$ = 1,800 rs.

X's  = 1,800×$\frac{2}{3}$ = 1,200 rs.

Z's  = 1,800 ×$\frac{1}{3}$ = 600 rs.

Y's share of goodwill is to be distributed between X and Z in their =2 : 1(Gaining Ratio)

Answer 2

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