Question

$X,Y$ and $Z$ are partners in a firm sharing profits and losses in the ratio in the ratio of $3:2:1$. $Z$ retires from the firm on 31st march, 2018. On the date of $Z^{\prime }s$ retirement, the following balance appeared in the books of the firm:
General Reserve $Rs.1,80,000$
Profit and Loss Account (Dr.) $Rs.30,000$
Workmen Compensation Reserve $Rs.24,000$ which was no more required.
Employee's Provident Fund $Rs.20,000$
Pass necessary Journal entries for the adjustment of these items on $Z^{\prime }s$ retirement.

Answer 1

Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
General Reserve A/c Dr.		1,80,000
Workmen Compensation Reserve A/c Dr.		24,000
To X’s Capital A/c			1,02,000
To Y’s Capital A/c			68,000
To Z’s Capital A/c			34,000
(Being accumulated profit distributed among partners in old ratio)
X’s Capital A/c Dr.		15,000
Y’s Capital A/c Dr.		10,000
Z’s Capital A/c Dr.		5,000
To Profit and Loss A/c			30,000
(Being debit balance in profit and loss A/c distributed among partners in old ratio)

Working note:

1. Calculation of share in credit balance of Reserve

Total credit balance of Reserves = General Reserve + WCF

= 1,80,000 + 24,000

= 2,04,000

X’s share = 2,04,000 X 3/6 = Rs. 1,02,000

Y’s share = 2,04,000 X 2/6 = Rs. 68,000

Z’s share = 2,04,000 X 1/6 = Rs. 34,000

2. Calculation of share in debit balance of Profit and Loss A/c

X’s share = 30,00 X 3/6 = Rs. 15,000

Y’s share = 30,000 X 2/6 = Rs. 10,000

Z’s share = 30,000 X 1/6 = Rs. 5,000

Note: Employer Provident Fund will not be distributed as it is a liability and not accumulated profit.