Question

The Balance Sheet of Mr. Mama, Kaka and Mr. Baba who shared profit and losses as 4:3:3 respectively.

Balance Sheet as on 31 st March 2018
Liabilities	Amount ₹	Amount ₹	Assets	Amount ₹	Amount ₹
Suppliers		7,000	Cash		4,500
Loan		5,000	Sundry Debtors	5,000
General Reserve		6,250	Less: R:D:D	500	4,500
Capital Account:			Live Stock		12,500
Mama		20,000	Motor Car		4,000
Kaka		15,000	Furniture		17,500
Baba		12,250	Plant		22,500
		65,500			65,500

Kaka retires on 1st April 2018 on the following terms.

1. The share of Kaka in Goodwill of the firm is valued at ₹ 2,700

2. Furniture to be depreciated by 10% and Motor Car by 12.5%

3. Live Stock to be appreciated by 10% and Plant by 20%

4. A provision of ₹ 2,000 to be made for a claim of compensation.

5. R.D.D. is no longer necessary.

6. The amount payable to Kaka should be transferred to his Loan A/c

Answer 1

Dr	In the books of Partnership Firm Profit and Loss Adjustments Account					Cr
Particulars			Amount (₹)	Particulars	Amount (₹)
To Furniture A/c			1,750	By Live Stock A/c	1,250
To Motor Car A/c			500	By Plant A/c	4,500
To Provision for Claim A/c			2,000	By R.D.D. A/c	500
To Partners’ Capital A/cs: Profit
Mama		800
Kaka		600
Baba		600	2000
			6,250		6,250

 

Balance Sheet as on 1st April 2018
Liabilities		Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Partners’ Capital A/cs :				Furniture	17,500
Mama		23,300		Less: Depreciation	1,750	15,750
Baba		14,725	38,025	Motor Car	4,000
Kaka’s Loan A/c			20,175	Less: Depreciation	500	3,500
Suppliers			7,000	Sundry Debtors		5,000
Loan			5,000	Live Stock	12,500
Provision for Claim			2,000	Add: Appreciation	1,250	13,750
				Plant	22,500
				Add: Appreciation	4,500	27,000
				Cash		4,500
				Goodwill		2,700
			72,200			72,200

 

Dr	Partners’ Capital Accounts								Cr
Particulars		Mama (₹)	Kaka (₹)	Baba (₹)	Particulars	Mama (₹)	Kaka (₹)	Baba (₹)
To Loan A/c			20,175		By Balance b/d	20,000	15,000	12,250
To Balance c/d		23,300		14,725	By General reserve A/c	2,500	1,875	1,875
					By Profit and Loss Adjustment A/c (Profit)	800	600	600
					By Goodwill A/c		2,700
		23,300	20,175	14,725		23,300	20,175	14,725

Working Notes :

(1) R.D.D. is no longer require means it is a gain for firm.

(2) A provision of ₹ 2,000 to be made for a claim of compensation, ₹ 2,000 is recorded on debit side of Profit and Loss Adjustments A/c and then on liability side of Balance Sheet.

(3) Total payable amount to Kaka ₹ 20,175 is recorded as Kaka’s Loan A/c.