Question

Pankaj, Naresh and Saurabh are partners sharing profits in the ratio of 3:2:1. Naresh retired from the firm due to his illness. On that date the Balance Sheet of the firm was as follows:

Books of Pankaj, Naresh and Saurabh
Balance Sheet as on March 31, 2017
Liabilities		Amount Rs	Assets		Amount Rs
General Reserve		12,000	Bank		7,600
Sundry Creditors		15,000	Debtors	6,000
Bills Payable		12,000	Less: Provision for Doubtful Debt	400	5,600
Outstanding Salary		2,200
Provision for Legal Damages		6,000	Stock		9,000
Capitals:			Furniture		41,000
Pankaj	46,000		Premises		80,000
Naresh	30,000
Saurabh	20,000	96,000
		1,43,200			1,43,200

Additional Information

(i) Premises have appreciated by 20%, stock depreciated by 10% and provision for doubtful debts was to be made 5% on debtors. Further, provision for legal damages is to be made for Rs 1,200 and furniture to be brought up to Rs 45,000.

(ii) Goodwill of the firm be valued at Rs 42,000.

(iii) Rs 26,000 from Naresh’s Capital account be transferred to his loan account and balance be paid through bank; if required, necessary loan may be obtained from Bank.

(iv) New profit sharing ratio of Pankaj and Saurabh is decided to be 5:1.

Give the necessary ledger accounts and balance sheet of the firm after Naresh’s retirement.

Answer 1

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

Parters’ Capital Accounts
Dr.				Cr.
Particulars	Pankaj	Naresh	Saurabh		Particulars	Pankaj	Naresh	Saurabh
Naresh’s Capital A/c	14,000				Balance b/d	46,000	30,000	20,000
Naresh’s Loan A/c		26,000			General Reserve	6,000	4,000	2,000
Bank		28,000			Revaluation (Profit)	9,000	6,000	3,000
Balance c/d	47,000		25,000		Pankaj’s Capital A/c		14,000
	61,000	54,000	25,000			61,000	54,000	25,000

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

Balance Sheet as on March 31, 2017
Liabilities		Amount Rs	Assets		Amount 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
Capitals:
Pankaj	47,000
Saurabh	25,000	72,000
		1,54,800			1,54,800