Class 12-commerce NCERT Solutions Accountancy Chapter 3 - Reconstitution of a Partnership Firm - Retirement/Death of a Partner

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Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 207

Solution SA 1

A partner can retire from the firm:

With the consent of all partners: A partner must take the consent of all the other partners of the firm before his/her retirement. The partner can retire from the firm only if all the partners have approved the decision of his/her retirement.
According to the terms of the express agreement: If there is an express agreement among the partners, the partner may retire according to the terms of the agreement.
At his own will: If the partner wants to retire at his/her own will, then a partner may retire by giving a written notice to all the other partners informing them about his/her intention to retire.

Solution SA 2

Various matters which need to be adjusted at the time of retirement of partner/s:

Computation of new profit-sharing ratio of the remaining partners of the firm
Computation of new gaining ratio of all the remaining partners of the firm
Computation of goodwill and its treatment
Adjustment for the revaluation of assets and liabilities
Distribution of accumulated profits and losses and reserves between all the partners including retiring partner
Adjustment of joint life policy
Settlement of the dues of retiring partners
Adjustment of capital account of the continuing partner in their new profit-sharing ratio

Solution SA 3

Basis of Difference	Sacrificing Ratio	Gaining Ratio
1. Meaning	Ratio in which old partners agree to surrender their share of profit in favour of new partner/s	Ratio in which the continuing partner acquires the share of profit from outgoing partner/s
2. Calculation	Sacrificing Ratio = Old Ratio - New Ratio	Gaining Ratio = New Ratio - Old Ratio
3. Time	Calculated at the time of admission of new partner/s	Calculated at the time of retirement/death of the partner/s
4. Objective	To find out the share of profit and loss given up by the existing partners in favour of new partner/s	To find out the share of profit and loss acquired by the remaining partners (of the new firm in case of retirement) from the retiring or deceased partner
5. Effect	Reduces the profit share of the existing partners	Increases the profit share of the remaining partners

Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 208

Solution SA 4

At the time of retirement or death of a partner, it becomes essential to revalue the assets and liabilities of the firm for finding out their true and fair values. Revaluation is needed as the value of assets and liabilities may increase or decrease with the passage of time. Further, it may be possible that certain assets and liabilities are left unrecorded in the books of accounts. The retiring or the deceased partner may be benefited or may bear loss due to change in the values of assets and liabilities. Therefore, the revaluation of the assets and liabilities is necessary to ascertain the true profit or loss which is to be distributed among all the partners in their old profit-sharing ratio.

Solution SA 5

The retiring/deceased partner is entitled to a share of goodwill of the firm because goodwill is an intangible asset which is earned by the efforts of all the partners in the firm. In the future, the fruits of past performance and reputation will be shared only by the remaining partners after the retirement or death of a partner. Therefore, the remaining partners should compensate the retiring/deceased partner by entitling him/her a share of the firm's goodwill.

Solution LA 1

The total amount due towards a retiring partner can be paid in any of the following manner:

(i) In lump sum: If the amount due to the retiring partner is to be paid in lump sum on the day of his/her retirement. This method is usually adopted when the amount payable is small and the following entry is passed to record such a payment.

Date	Particulars		L.F.	Dr. Rs.	Cr. Rs.
	Retiring Partner's Capital A/c	Dr.
	---------To Cash/Bank A/c Capital A/c
	(Being retiring partner paid in cash)

(ii) In instalments: Sometimes, the amount payable to the retiring partner is quite a large amount which a firm is unable to pay in one payment. In such cases, the amount not paid at the time of retirement (or amount which has been decided to be paid in instalments) is transferred to his/her loan account. In this case, the retiring partner receives equal instalments along with the interest on the amount outstanding. The following necessary journal entry is to be passed:

Date	Particulars		L.F.	Dr. Rs.	Cr. Rs.
	Retiring Partner's Capital A/c	Dr.
	---------To Retiring Partner's Loan A/c
	(Being retiring partner's capital account transferred to the retiring partner's loan account @ % p.a.)

(iii) Partly in Cash and Partly in Instalments: If the amount due to the retiring partner is to be paid partly in cash and partly in equal instalments, then a certain amount is paid in cash to the retiring partner on the date of the retirement and the rest amount due to him/her is transferred to his/her loan account. The following necessary journal entry is to be passed:

Journal
Date	Particulars		L.F.	Dr. Rs.	Cr. Rs.
	Retiring Partner's Capital A/c	Dr.
	---------To Cash/Bank A/c Capital A/c
	(Amount transferred to the partner's loan account)
	---------To Cash A/c (Amount paid in cash immediately on the date of the retirement)
	(Being retiring partner partly paid in cash and balance transferred to the partner's loan account)

Solution LA 2

The amount payable to the deceased partner can be ascertained by preparing his/her capital account. The legal executer of the deceased partner would be entitled to the balance in deceased partner's capital account. The balancing figure of the deceased partner's capital account is derived after posting the below mentioned items:

1. Crediting deceased partner's capital account with

Credit balance of capital account and/or current account
Deceased partner's share of profit up to the date of his/her death
Deceased partner's share of goodwill
Deceased partner's share in accumulated reserves and profit account
Deceased partner's share in gain on revaluation of assets and liabilities
Deceased partner's share of Joint Life Policy
Interest on capital, if any, up to the date of the death
Salary or commission, if any, up to the date of the death

2. Debiting deceased partner's capital account with

Debit balance of the deceased partner's capital account and/or current account.

Drawings up to the date of death of the partner
Interest on drawings, if any, up to the date of the death
Deceased partner's share in loss on revaluation of assets and liabilities
Deceased partner's share of loss up to the date of the death
Deceased partner's share in the accumulated losses of the firm

The legal executor is entitled to the balancing figure which is the excess of the credit side over the debit side of the deceased partner's capital account.

Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
	To Revaluation A/c (Loss)				By Balance b/d
	To Profit and Loss Suspense A/c (Share of loss up to the date of the death)				By Profit and Loss Suspense A/c (Share in profits up to the date of the death)
	To Accumulated Losses A/c				By Goodwill A/c
	To Goodwill A/c (Written off)				By Reserve and Profit A/c
	To Drawings A/c				By Revaluation A/c (gain)
	To Interest on Drawings A/c				By Joint Life Policy A/c
	To Partner's Executor's A/c (Balancing Figure)				By Interest on Capital A/c
					By Salary A/c
					By Commission A/c
			xxx				Xxx

Solution LA 3

Generally, in accounting terms, the retiring or deceased partner's capital account is credited with his share of goodwill and continuing partner's capital accounts are debited from the gaining ratio. This treatment is based on Para 16 of Accounting Standard 10, which states that it is mandatory to record goodwill in the books only when consideration in money or money's worth has been paid for it.

In case of retirement and death of a partner, goodwill account cannot be raised. There are namely two probable situations on which the treatment of goodwill rests.

If goodwill already appears in the books of the firm
If no goodwill appears in the books of the firm

The treatment of goodwill in the above two scenarios is discussed below.

Scenario 1: Goodwill already appears in the books of the firm

Step 1: Write off the existing goodwill

The goodwill already appearing in the old balance sheet of the firm (if mentioned in the question), is first written off and is to be distributed among all partners of the firm including the retiring or deceased partner in their old profit-sharing ratio. The following journal entry is passed to write off the old/existing goodwill:

Date	Particulars		L.F.	Dr. Rs.	Cr. Rs.
	Partner's Capital A/c	Dr.
	---------To Goodwill A/c
	(Being goodwill written off among all partners in their old ratio)

Step 2: Adjusting goodwill through partner's capital account

After writing off the old goodwill, the goodwill needs to be adjusted through the partner's capital account with the share of the goodwill of the retiring or the deceased partner. The following journal entry is passed:

Date	Particulars		L.F.	Dr. Rs.	Cr. Rs.
	Remaining Partner's Capital A/c	Dr.
	---------To Retiring/Deceased Partner's Capital A/c
	(Being gaining partner's capital A/c debited from gaining share and retiring/deceased partner's capital account credited for share of goodwill)

Scenario 2: No goodwill appears in the books of the firm

In case no goodwill appears in the books of the firm, the goodwill is adjusted through the partner's capital account with the share of the goodwill of the retiring or deceased partner.

The following is the journal entry which is passed to give the required affect:

Date	Particulars		L.F.	Dr. Rs.	Cr. Rs.
	Remaining Partner's Capital A/c	Dr.
	---------To Retiring/Deceased Partner's Capital A/c
	(Being gaining partner's capital A/c debited from gaining share and retiring/deceased partner's capital account credited for share of goodwill)

Solution LA 4

A deceased partner's share of profits can be calculated on any of the following basis depending on the agreement between partners.

1. On the basis of time:

Profit up to the date of the death of the partner is calculated on the basis of last year's profit or average profit of last few years. In this approach, it is assumed that the profit will be uniform throughout the current year. The deceased partner will be entitled to the share of the profit proportionately up to the date of his/her death.

Share of Deceased Partner in Profit =

Example:

L, M and N are equal partners. The profit of the firm for the years 2013, 2014 and 2015 are Rs 20,00,000, Rs 14,00,000 and Rs 26,00,000, respectively. N dies on 31 March 2016. The share of N in the firm's profit will be calculated on the basis of the average profit of the last three years. The firm closes its books every year on 31 December.

In this case, N's share in the profits will be calculated for four months, i.e. from 1 January 2016 to 31 March 2016.

2. On the basis of sale: Profit is calculated on the basis of last year's sale. In this situation, it is assumed that the net profit margin of the current year's sale is similar to that of the last year.

Example: P, Q and R are equal partners. Sales for the previous year and the profits were Rs 12,50,000 and Rs 1,25,000. R died on 30 June 2015. Sale of the current year till the date of R's death amounted to Rs 6,00,000. The firm closes its books on 31 December every year.

Solution NUM 1

Books of Aparna and Sonia Journal
Date	Particulars		L.F.	Dr. Rs.	Cr. Rs.
	Aparna's Capital A/c	Dr.		18,000
	Sonia's Capital A/c	Dr.		42,000
	---------To Manisha's Capital A/c				60,000
	(Being manisha's share of goodwill adjusted to aparna's and Sonia's capital account in their gaining ratio)

Working Note:

Solution Num 2

Books of Saroj and Shanti Journal
Date	Particulars		L.F.	Dr. Rs.	Cr. Rs.
	Sangeeta's Capital A/c	Dr.		12,000
	Saroj's Capital A/c	Dr.		18,000
	Shanti's Capital A/c	Dr.		30,000
	---------To Goodwill A/c				60,000
	(Being goodwill written off)

	Saroj's Capital A/c	Dr.		18,000
	---------To Sangeeta's Capital A/c				18,000
	(Being sangeeta's share of goodwill adjusted to saroj's capital account in her gaining ratio)

Working Note:

Solution Num 3

Books of Himanshu and Gagan Journal
Date	Particulars		L.F.	Dr. Rs.	Cr. Rs.
	Building A/c	Dr.		20,000
	Investment A/c	Dr.		5,000
	---------To Revaluation A/c				25,000
	(Being value of building and investment increased at the time of Naman's retirement)

	Revaluation A/c	Dr.		7,000
	---------To Plant and Machinery A/c				4,000
	---------To Provision for Bad and Doubt Debts A/c				1,000
	---------To Stock A/c				2,000
	(Being assets revalued and provision for bad and doubtful debts made at time of naman's retirement)

	Revaluation A/c	Dr.		18,000
	---------To Himanshu's Capital A/c				9,000
	---------To Gangan's Capital A/c				6,000
	---------To Naman's Capital A/c				3,000
	(Being Profit on revaluation transferred to all partners capital account in their old profit sharing ratio)

Revaluation Account
Dr.			Cr.
Particulars			Rs.	Particulars	Rs.
To Plant and Machinery A/c			4,000	By Building A/c	20,000
To Stock A/c			2,000	By Investment A/c	5,000
To Provision for Bad and Doubtful Debts A/c			1,000
To Profit transferred:
	Himanshu Capital A/c	9,000
	Gangan Capital A/c	6,000
	Naman Capital A/c	3,000	18,000
			25,000		25,000

Solution Num 4

Books of Naresh and Bishwajeet Journal
Date	Particulars		L.F.	Dr. Rs.	Cr. Rs.
	General Reserve A/c	Dr.		36,000
	---------To Naresh's Capital A/c				12,000
	---------To Raj Kumar's Capital A/c				12,000
	---------To Bishwajeet's Capital A/c				12,000
	(Being general reserve distributed among old partner in old ratio)

	Naresh's Capital A/c	Dr.		5,000
	Raj Kumar's Capital A/c			5,000
	Bishwajeet's Capital A/c			5,000
	---------To Profit and Loss A/c				15,000
	(Being debit balance of profit and loss account written off)

Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 209

Solution Num 5

Books of Digvijay and Parakaram
Revaluation Account
Dr.				Cr.
Particulars	Rs.	Particulars				Rs.
To Bad Debts A/c	2,000
To Patents A/c	9,000	By loss transferred to:
			Digvijay Capital A/c		4,400
			Brijesh Capital A/c		4,400
			Parakaram Capital A/c		2,200	11,000

	11,000					11,000

Partners' Capital Account
Dr.							Cr.
Particulars	Digvijay	Brijesh	Parakaram	Particulars	Digvijay	Brijesh	Parakaram
To Brijesh's Capital A/c	18,667		9,333	By Balance b/d	82,000	60,000	75,500
To Revaluation A/c(Loss)	4,400	4,400	2,200	By Reserve A/c	7,400	7,400	3,700
To Brijesh's Loan A/c		91,000		By Digvijay's Capital A/c		18,667
To Balance c/d	66,333		67,667	By Parakaram's Capital A/c		9,333


	89,400	95,400	79,200		89,400	95,400	79,200

Balance Sheet as on March 31, 2017
Dr.					Cr.
Liabilities	Rs.	Assets			Rs.
Creditors	49,000	Cash			8,000
Brijesh's Loan	91,000	Debtors		19,000
Digvijay's Capital	66,333		Less: Bad Debts	2,000	17,000
Parakaram's Capital	67,667	Stock			42,000
		Building			2,07,000
	2,74,000				2,74,000

Since, sufficient balance is not available to pay the amount due to Brijesh, the balance of his Capital Account transferred to his loan account.

Solution Num 6

Books of Radha and Meena
Revaluation Account
Dr.			Cr.
Particulars			Rs.	Particulars	Rs.
To Machinery A/c			800	By Expenses Owing A/c	750
To Losse Tools A/c			400	By Factory Premises A/c	1,800
To Profit transferred to:
	Meena Capital A/c	675
	Radha Capital A/c	450
	Sheela Capital A/c	225	1,350
			2,550		2,550

Partners' Capital Account
Dr.							Cr.
Particulars	Radha	Sheela	Meena	Particulars	Radha	Sheela	Meena
To Sheela's Capital A/c	3,250		1,083	By Balance b/d	15,000	15,000	15,000
To Sheela's Loan A/c		24,283		By General Reserve A/c	6,750	4,500	2,250
To Balance c/d	19,175		16,392	By Revaluation A/c (Profit)	675	450	225
				By Radha's Capital A/c		3,250
				By Meena's Capital A/c		1,083
	22,425	24,283	17,475		22,425	24,283	17,475

Balance Sheet as on April 1,2017
Liabilities			Rs.	Assets			Rs.
Trade Creditors			3,000	Cash in Hand			1,500
Bills Payable			4,500	Cash at Bank			7,500
Expenses Owing			3,750	Debtors			15,000
Sheela's Loan			24,283	Stock			12,000
Capital:				Factory premises			24,300
	Radha	19,175		Machinery		8,000
	Meena	16,392	35,567		Less : 10%	800	7,200
				Losse Tools		4,000
					Less : 10%	400	3,600
			71,100				71,100

Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 210

Solution Num 7

Revaluation Account
Dr.			Cr.
Particulars			Rs.	Particulars	Rs.
Stock			900	Premises	16,000
Provision for Legal Damages			1,200	Provision for Doubtful Debts	100
Profit transferred to Capital Account:				Furniture	4,000
	Pankaj	9,000
	Naresh	6,000
	Saurabh	3,000	18,000
			20,100		20,100

Partners' Capital Account
Dr.							Cr.
Particulars	Pankaj	Naresh	Saurabh	Particulars	Pankaj	Naresh	Saurabh
To Naresh's Capital A/c	14,000			By Balance b/d	46,000	30,000	20,000
To Naresh's Loan A/c		26,000		By General Reserve A/c	6,000	4,000	2,000
To Bank A/c		28,000		By Revaluation A/c (Profit)	9,000	6,000	3,000
To Balance c/d	47,000		25,000	By Pankaj's Capital A/c		14,000

	61,000	54,000	25,000		61,000	54,000	25,000

Bank Account
Dr.	Cr.
Particulars	Rs.	Particulars	Rs.
To Balance b/d	7,600	By Naresh's Capital A/c	28,000
To Bank Loan A/c ( Balancing Figure)	20,400

	28,000		28,000

Balance Sheet as on September 30,2017
Liabilities			Rs.	Assets			Rs.
Sundry Creditors			15,000	Debtors		6,000
Bills Payable			12,000		Less: Provision for Doubtful Debts	300	5,700
Bank Loan/ Overdraft			20,400	Stock			8,100
Outstanding Salaries			2,200	Furniture			45,000
Provision for Legal Damages			7,200	Premises			96,000
Naresh's Loan			26,000
Capital:
	Pankaj	47,000
	Saurabh	25,000	72,000
			1,54,800				1,54,800

Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 211

Solution Num 8

Pammy's Capital Account
Dr.	Cr.
Particulars	Rs.	Particulars	Rs.
To Drawings A/c	10,000	By Balance b/d	40,000
To Pammy Executor's A/c	75,400	By Profit and Loss A/c (Suspense)	3,000
		By Puneet's Capital A/c	15,000
		By Pankaj's Capital A/c	15,000
		By Interest on Capital A/c	2,400
		By Reserve	10,000
	85,400		85,400

Pammy's Executor Account
Date	Particulars	Rs.	Date	Particulars	Rs.
2017-18			2017-18
Sept 30	To Bank A/c	15,400	Sept 30	By Pammy's Capital A/c	75,400
Mar 31	To Balance c/d	63,600	Mar 31	By Interest A/c	3,600

		79,000			79,000
2018-19			2018-19
Sep 30	To Bank A/c (15,000+3,600+3,600)	22,200	Apr 01	By Balance b/d	63,600
Mar 31	To Balance c/d	47,700	Sep 30	By Interest A/c	3,600
			Mar 31	By Interest A/c	2,700

		69,900			69,900
2019-20			2019-20
Sep 30	To Bank A/c	20,400	Apr 01	By Balance b/d	47,700
Mar 31	To Balance c/d	31,800	Sep 30	By Interest A/c	2,700
			Mar 31	By Interest A/c	1,800

		52,200			52,200
2020-21			2020-21
Sep 30	To Bank A/c (15,000+1,800+1,800)	18,600	Apr 01	By Balance b/d	31,800
Mar 31	To Balance c/d	15,900	Sep 30	By Interest A/c	1,800
			Mar 31	By Interest A/c	900

		34,500			34,500
2021-22			2021-22
Sep 30	To Bank A/c (15,000+900+900)	16,800	Apr 01	By Balance b/d	15,900
			Sep 30	By Interest A/c	900

		16,800			16,800

3.Interest Amount

The firm closes its books every year on march 31 While installments to Pammy's Executor are paid on sept.30 every year.

Amount outstanding on 30 September = 75,400 - 15,400 = 60,000

Periods	Outstanding	Yearly Interest	For 6 Month
2017 - 18	60,000
2018 - 19	45,000
2019 - 20	30,000
2020 - 21	15,000

Solution Num 9

Books of Prateek and Kushal Journal
Date	Particulars		L.F.	Dr. Rs.	Cr. Rs.
2017
June 30	General Reserve A/c	Dr.		250
	Profit and Loss ( Suspense) A/c	Dr.		1,000
	General Reserve A/c	Dr.		4,571
	---------To Rockey's Capital A/c				5,821
	(Being share of profit, interest on capital and share of general reserve credited to rockey's account)

June 30	Pateek's Capital A/c	Dr.		4,800
	Kunal Capital A/c	Dr.		3,200
	---------To Rockey's A/c				8,000
	(Being rockey's share of goodwill adjusted to prateek's and Kunal's capital in their gaining ratio, 3:2)

June 30	Rockey' Capital A/c	Dr.		33,821
	---------To Rockey's Executor's A/c				33,821
	(Being balance of rockey capital account transferred to his executor 's account)

Rockey's Capital Account
Date	Particulars	Rs.	Date	Particulars	Rs.
2017			2017
Apr 01	To Rockey's Executor A/c	33,821	Apr 01	By Balance b/d	20,000
				By Interest on capital A/c	250
				By Profit and Loss (Suspense) A/c	1,000
				By General Reserve A/c	4,571
				By Prateek's Capital A/c	4,800
				By Kushal's Capital A/c	3,200

		33,821			33,821

Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 212

Solution Num 10

Revaluation Account
Dr.			Cr.
Particulars			Rs.	Particulars	Rs.
To Machinery A/c			3,000	By Freehold Property A/c	8,000
To Furniture A/c			840	By Stock A/c	3,300
To Reserve for Bad Debts A/c			500
To Capitals:
	Narang	3,480
	Suri	1,160
	Bajaj	2,320	6,960
			11,300		11,300

Partners' Capital Account
Dr.							Cr.
Particulars	Narang	Suri	Bajaj	Particulars	Narang	Suri	Bajaj
To Bajaj's Capital A/c	5,250	1,750		By Balance b/d	30,000	30,000	28,000
To Bajaj's Loan A/c			41,320	By Reserve A/c	6,000	2,000	4,000
To Balance c/d	34,230	31,410		By Revaluation A/c (Profit)	3,480	1,160	2,320
				By Narang's Capital A/c			5,250
				By Suri's Capital A/c			1,750

	39,480	33,160	41,320		39,480	33,160	41,320

To Suri's Current A/c		15,000		By Balance b/d	34,230	31,410
To Balance c/d	49,230	16,410		By Narang's Current A/c	15,000

	49,230	31,410			49,230	31,410

Balance Sheet as on April 01,2017
Liabilities			Rs.	Assets			Rs.
Biils Payable			12,000	Free hold Premises			48,000
Sundry Creditors			18,000	Machinery			27,000
Bajan's Loan			41,320	Furniture			11,160
Suri current Capital Account:			15,000	Stock			25,300
	Narang	49,230		Sundry Debtors		20,000
	Suri	16,410	65,640		Less: Reserve for Bad Debts	1,500	18,500
				Cash			7,000
				Narang's Current A/c			15,000

			1,51,960				1,51,960

NOTE:

In the given Question Suri's Capital is Rs 30,000 instead of Rs 20,000.
Due to insufficient balance in Bajaj's Capital Account, the amount due to Bajaj is transferred to his Loan Account.

Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 213

Solution Num 11

Journal
Date	Particulars		L.F.	Dr. Rs.	Cr. Rs.
2015
Mar 30	Revalutaion A/c	Dr.		1,840
	---------To Stock A/c				1,550
	---------To Reserve for Doubtful Debts A/c				25
	---------To Reserve for Legal Charges A/c				265
	(Being Assets and Liabilities are Revalued)

June 30	Factory Building A/c	Dr.		1,440
	---------To Revalutaion A/c				1,440
	(Being factory building appreciate)

mar 31	Rajesh's Capital A/c	Dr.		160
	Pramod's Capital A/c	Dr.		120
	Nishant's Capital A/c	Dr.		120
	---------To Revalutaion A/c				400
	(Being loss on revaluation adjusted to partners 'capital account)

Mar 31	Rajesh's Capital A/c	Dr.		2,000
	Nishant's Capital A/c	Dr.		1,000
	---------To Pramod's Capital A/c				3,000
	(Being pramod's share of goodwill adjusted to rajesh and nishant capital account in their gaining ratio)

Mar.31	Reserve Fund A/c	Dr.		2,750
	---------To Rajesh's Capital A/c				1,100
	---------To Pramod's Capital A/c				825
	---------To Nishant's Capital A/c				825
	(Being reserve fund distributed all the partners)

Mar.31	Pramod's Capital A/c	Dr.		18,705
	---------To Pramod's Loan A/c				18,705
	(Being pramod's capital transferred to his loana account)

Mar.31	Rajesh's Capital A/c			940
	Nishant's Capital A/c			2,705
	---------To Rajesh's Current A/c				940
	---------To Nishant's Current A/c				2,705
	(Being excess in capital account is transferred to current account)

Partners' Capital Account
Dr.							Cr.
Particulars	Rajesh	Pramod	Nishant	Particulars	Rajesh	Pramod	Nishant
To Revaluation A/c (Loss)	160	120	120	By Balance b/d	20,000	15,000	15,000
To Pramod's Capital A/c	2,000		1,000	By Reserve Fund A/c	1,100	825	825
To Pramod 's Loan A/c		18,705		By Rajesh's Capital A/c		2,000
To Rajesh's Current A/c	940			By Nishant's Capital A/c		1,000
To Nishant's Current A/c			2,705
To Balance c/d	18,000		12,000

	21,100	18,825	15,825		21,100	18,825	15,825

Balance Sheet as on March 31,2015
Liabilities			Rs.	Assets			Rs.
Bills Payable			6,250	Plant and Machinery			11,500
Sundry Creditors			10,000	Debtors		10,500
Reserve for Legal Charges			265		Less: Reserve	525	9,975
Pramod's Loan			18,705	Bills Receivable			7,000
Current Account:
	Rajesh	940		Stock		15,500
	Nishant	2,705	3,645		Less : 10% Depreciation	1,550	13,950
Capital Account:				Factory Building		12,000
	Rajesh	18,000			Add: 12% Appreciation	1,440	13,440
	Nishant	12,000	30,000	Bank Balance			13,000
			68,865				68,865

NOTE:

In the above solution, in order to adjust the capital of remaining partners in the new firm according to their new profit sharing ratio, the surplus or the deficit of Capital Account is transferred to their Current Account. But, in order to match the answer with that of given in the book, the surplus or the deficit amount of the Partners' Capital Account, will either be withdrawn or brought in by the old partners. This treatment will be shown in the Partners' Capital itself and no need to transfer the surplus or deficit capital balance to their Current Accounts. The following Journal entry is passed to record the withdrawal of surplus capital by the partners. If existing partners withdraw their excess capital Journal entry

Journal
Date	Particulars		L.F.	Dr. Rs.	Cr. Rs.
2015
Mar 30	Rajesh's Capital A/c	Dr.		940
	Nishant's Capital A/c	Dr.		2,705
	---------To Bank A/c				3,645
	(Being surplus capital withdrawn)

Balance Sheet as on March 31,2015
Liabilities			Rs.	Assets			Rs.
Biils Payable			6,250	Plant and Machinery			11,500
Sundry Creditors			10,000	Debtors		10,500
Reserve for Legal Charges			265		Less: Reserve	525	9,975
Pramod's Loan			18,705	Bills Receivable			7,000
Current Account:
	Rajesh	18,000		Stock		15,500
	Nishant	12,000	30,000		Less : 10% Depreciation	1,550	13,950
				Factory Building		12,000
					Add: 12% Appreciation	1,440	13,440
				Bank Balance			9,355
			65,220				65,220

Solution Num 12

In the Books of Jain and Gupta
Revaluation Account
Dr.				Cr.
Particulars	Rs.	Particulars			Rs.
To Office Furniture A/c	4,000	By Stock A/c			1,900
To Land and Building A/c	6,000	By Plant and Machinery A/c			3,300
To Provision for Doubtful Debts	1,700	By Loss transferred to:
			Jain's Capital A/c	3,250
			Gupta's Capital A/c	1,950
			Malik's Capital A/c	1,300	6,500
	11,700				11,700

Partners' Capital Account
Dr.							Cr.
Particulars	Jain	Gupta	Malik	Particulars	Jain	Gupta	Malik
To Revaluation A/c (Profit)	3,250	1,950	1,300	By Balance b/d	40,000	60,000	20,000
To Malik's Capital A/c	1,125	675		By Accumulated Profit A/c	8,375	5,025	3,350
To Cash A/c			16,500	By Jain Capital A/c			1,125
To Malik's Loan A/c			7,350	By Gupta's Capital A/c			675
To Balance c/d	53,900	69,000		By Cash A/c	9,900	6,600
	58,275	71,625	25,150		58,275	71,625	25,150

Balance Sheet as on April 01,2016

Dr.							Cr.
Liabilities			Rs.	Assets			Rs.
Sundry Creditors			19,800	Stock (18,100+1,900)			20,000
Telephone Bills Outstanding			300	Bonds			14,370
Account Payable			8,950	Cash			5,500
Malik's loan			7,350	Bills Receivable			23,450
Partner's Capital				Sundry Debtors		26,700
	Jain	53,900			Less: Provision for Bad Debts	1,700	25,000
	Gupta	69,000	1,22,900	Land and Building (26,000-6,000)			20,000
				Office Furniture (18,250-4,000)			14,250
				Plant and Machinery (20,230+3,300)			23,530
				Computers			13,200
			1,59,300				1,59,300

Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 214

Solution Num 13

Journal
Date	Particulars		L.F.	Dr. Rs.	Cr. Rs.
2016
June 12	Interest on Capital A/c	Dr.		240
	General Reserve A/c	Dr.		4,000
	Profit and Loss A/c	Dr.		3,333
	---------To Bharti's Capital A/c				7,573
	(Being Profit, interest and general reserve are in creditors to Bharti's capital account))

June 12	Arti's capital A/c	Dr.		3,600
	Seema's Capital A/c	Dr.		1,200
	---------To Bharti's Capital A/c				4,800
	(Being Bharti's Share of Goodwill adjusted to Arti's and Seem's capital account in their gaining ratio,3:1)

June 12	Bharti's Capital A/c	Dr.		24,373
	---------To Bharti's Executor's A/c				24,373
	(Being bharti's capital account is transferred to her executor's account)

June 12	Bank A/c	Dr.		16,200
	---------To Investment A/c				13,250
	---------To Profit on Sale of investment A/c				2,950
	(Being investment sold)

June 12	Bharti's Executor's A/c	Dr.		24,373
	---------To Bank A/c				24,373
	(Being bharti's executor paid)

Bharti's Capital Account
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
2016				2016
June 12	To Bharti's Executor A/c		24,373	Mar 31	By Balance b/d		12,000
				June 12	By Interest on capital		240
					By Profit and Loss (Suspense) A/c		3,333
					By General Reserve		4,000
					By Arti's Capital A/c		3,600
					By Seema's Capital A/c		1,200


			24,373				24,373

Bharti's Capital Account
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
2016				2016
June 12	To Bank A/c		24,373	June 12	By Bharti's Capital A/c		24,373


			24,373				24,373

Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 215

Solution Num 14

Journal
Date	Particulars		L.F.	Dr. Rs.	Cr. Rs.
2015
May 01	Nithya's Capital A/c	Dr.		2,500
	Sathya's Capital A/c	Dr.		1,500
	Mithya's Capital A/c	Dr.		1,000
	---------To Goodwill A/c				5,000
	(Being goodwill written off among all the partners)

May 01	Patents A/c	Dr.		2,000
	Premise A/c	Dr.		5,000
	---------To Revaluation A/c				7,000
	(Being increase in the value of patents and premises)

May 01	Revaluation A/c	Dr.		5,000
	---------To Machinery A/c				5,000
	(Being decrese in the value of machinery)

May 01	Revaluation A/c	Dr.		2,000
	---------To Nithya's Capital A/c				1,000
	---------To Sathya's Capital A/c				600
	---------To Mithya's Capital A/c				400
	(Being profit on revaluation of assets and liabilities transferred to partners' capital account)

May 01	Reserve Fund A/c	Dr.		6,000
	---------To Nithya's Capital A/c				3,000
	---------To Sathya's Capital A/c				1,800
	---------To Mithya's Capital A/c				1,200
	(Being reserve fund transferred to partners capital account)

May 01	Nithya's Capital A/c	Dr.		4,375
	Sathya's Capital A/c	Dr.		2,625
	---------To Mithya's Capital A/c				7,000
	(Being mithya's share of goodwill adjusted to nithya's and sathya's capital account in their gaining ratio 5:3)

May 01	Profit and Loss A/c (Suspense)	Dr.		1,000
	---------To Mithya's Capital A/c				1,000
	(Being profit till date of death credited to mithya's capital account)

May 01	Mithya's Capital A/c	Dr.		28,600
	---------To Mithya's Executors A/c				28,600
	(Being mithya's capital account transferred to her executor account)

May 01	Mithya's Executors A/c	Dr.		4,200
	---------To Cash A/c				4,200
	(Being cash paid to mithya's executor)

Mithya's Executor's Account
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
2015				2015
May 01	To Bank A/c		4,200	May 01	By Mithya's Capital A/c		28,600
Oct 31	To Bank A/c (6,100+ 1,220)		7,320	Oct 31	By Interest A/c		1,220
Dec 31	To Balance c/d		18,605	Dec 31	By Interest {915 × 2/6}		305

			30,125				30,125
2016				2016
Apr 30	To Bank A/c ( 6,100 + 915 )		7,015	Jan 01	By Balance b/d		18,605
Oct 31	To Bank A/c (6,100 + 610 )		6,710	Apr 30	By Interest A/c {915 × 4/6}		610
Dec 31	To Balance c/d		6,202	Oct 31	By Interest A/c		610
				Dec 31	By Interest A/c {305 × 2/6}		102

			19,927				19,927
2017				2017
Apr 30	To Bank A/c (6,100 + 305)		6,405	Jan 01	By Balance b/d		6,202
				Apr 30	By Interest {305 × 4/6}		102

			6,405				6,405

Balance Sheet as on May 01, 2015
Liabilities			Rs.	Assets	Rs.
Creditors			14,000	Investment	10,000
Mithya's Executor's Loan A/c			24,400	Premises	25,000
Partners' Capitla A/c				Machinery	25,000
	Nithya	27,125		Stock	13,000
	Sathya	28,275	55,400	Debtors	8,000
				Patents	8,000
				Bank ( 8,000 - 4,200)	3,800
				Profit and Loss (Suspense)	1,000
			93,800		93,800

Working Note:

Partners' Capital Account
Dr.							Cr.
Particulars	Nithya	Sathya	Mithya	Particulars	Nithya	Sathya	Mithya
To Goodwill	2,500	1,500	1,000	By Balance b/d	30,000	30,000	20,000
To Mithya's Capital A/c	4,375	2,625		By Revaluation A/c	1,000	600	400
To mithya's executor's A/c			28,600	By Reserve fund	3,000	1,800	1,200
To Balance c/d	27,125	28,275		By Profit and Loss A/c (Suspense)			1,000
				By Nithya's Capital A/c			4,375
				By Sathya's Capital A/c			2,625
	34,000	32,400	29,600		34,000	32,400	29,600

Calculation of Interest
Period	Amount Outstanding	Interest
May 01, 15 to Oct 31, 15	24,400
Nov 01, 15 to Apr 30, 16	18,300
May 01,16 to Oct 31, 15	12,200
Nov 01, 16 to Apr 30,17	6,100

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Class 12-commerce NCERT Solutions Accountancy Chapter 3 - Reconstitution of a Partnership Firm - Retirement/Death of a Partner

Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 207

Solution SA 1

Solution SA 2

Solution SA 3

Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 208

Solution SA 4

Solution SA 5

Solution LA 1

Solution LA 2

Solution LA 3

Solution LA 4

Solution NUM 1

Solution Num 2

Solution Num 3

Solution Num 4

Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 209

Solution Num 5

Solution Num 6

Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 210

Solution Num 7

Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 211

Solution Num 8

Solution Num 9

Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 212

Solution Num 10

Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 213

Solution Num 11

Solution Num 12

Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 214

Solution Num 13

Reconstitution of a Partnership Firm - Retirement/Death of a Partner Exercise 215

Solution Num 14

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