Question

X, Y and Z were in partnership sharing profits and losses in the proportions of 3 : 2 : 1. On 1st April, 2018 Y retires from the firm. On that date, their Balance Sheet was:
The terms were:
(a) Goodwill of the firm was valued at ₹ 13,500 and adjustment in this respect was to be made in the continuing Partners Capital Accounts without raising Goodwill Account.
(b) Expenses Owing to be brought down to ₹ 3,750.
(c) Machinery and Loose Tools are to be valued @ 10% less than their book value.
(d) Factory Premises are to be revalued at ₹ 24,300.
Show Revaluation Account, Partners Capital Accounts and prepare the Balance Sheet of the firm after the retirement of Y.

Answer 1

Working Notes:

1. Calculation of Gaining Ratio

X : Y : Z = 3 : 2 : 1 (Old Ratio)

Y's retires from the firm.

Therefore, Gaining Ratio (X and Z) = 3 : 1

2. Adjustment of Goodwill

$\text{Goodwill of the firm} = Rs.13,500 \\ \\Y's Goodwill =13,500 \times \frac{2}{6}=4,500$

$X^{\prime} s=4,500 \times \frac{3}{4}= Rs.3,375\\ \\&Z^{\prime} s=4,500 \times \frac{1}{4}= Rs.1,125\end{aligned}$