Question

P, Q and R are partners in a firm sharing profits in the ratio of 2 : 2 : 1. R retires and the Balance Sheet of the firm as at that date was as under :

BALANCE SHEET

As at .................

$\begin{array}{ccccc}\text{Capital and Liabilities}& & \text{Amount}& \text{Assets}& \text{Amount}\\ & & \text{Rs}& & \text{Rs}\\ \text{Creditors}& & 30,000& \text{Cash}& 8,000\\ \text{General Reserve}& & 60,000& \text{Debtors}& 75,000\\ \text{Profit \& Loss Account}& & 15,000& \text{Stock}& 90,000\\ \text{Workmen's Compensation}& & & \text{Plant}& 1,40,000\\ \text{Reserve}& & 10,000& \text{Patents}& 22,000\\ \text{Capital Accounts :}& & & & \\ P& 1,00,000& & & \\ Q& 80,000& & & \\ R& \underset{–}{40,000}& \underset{–}{2,20,000}& & \\ & & \underset{–}{\underset{–}{3,35,000}}& & \underset{–}{\underset{–}{3,35,000}}\end{array}$

It was agreed that stock is to be brought down to Rs 82,000 and plant is reduced by Rs 20,000. Patents were found valueless. There was no liability on account of workmen's compensation reserve.

Record necessary entries at the time of retirement.

Answer 1

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Dr.(Rs)}& \text{Cr. (Rs)}\\ & \text{General Reserve A/c}& \text{Dr.}& & 60,000& \\ & \text{Profit}\&\text{Loss A/c}& \text{Dr.}& & 15,000& \\ & \text{Workmen's Compensation Reserve A/c}& \text{Dr.}& & 10,000& \\ & \text{To P's Capital A/c}& & & & 34,000\\ & \text{To Q's Capital A/c}& & & & 34,000\\ & \text{To R's Capital A/c}& & & & 17,000\\ & \text{(The distribution of free reserves among partners)}& & & & \\ & \text{Revaluation A/c}& \text{Dr.}& & 50,000& \\ & \text{To Stock A/c}& & & & 8,000\\ & \text{To Plant A/c}& & & & 20,000\\ & \text{To Patents A/c}& & & & 22,000\\ & \text{(The decrease in assets)}& & & & \\ & \text{P's Capital A/c}& \text{Dr.}& & 20,000& \\ & \text{Q's Capital A/c}& \text{Dr.}& & 20,000& \\ & \text{R's Capital A/c}& \text{Dr.}& & 10,000& \\ & \text{To Revaluation A/c}& & & & 50,000\\ & \text{(The transfer of loss on revaluation t partner's capital}& & & & \\ & \text{accounts)}& & & & \end{array}$