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Question
Harish, Paresh and Mahesh were three partners as sharing profits and losses in the ratio of 5:4:1. Paresh retired on 31st March, 2017. His capital on 1st April, 2016, was Rs. 80,000. During the year 2016-17, he made drawings of Rs. 5,000. He was to be charged interest on drawings of ` 100. The partnership deed provides that on the retirement of a partner, he will be entitled to:
(i) His share of capital.
(ii) Interest on capital @ 10% per annum.
(iii) His share of profit for the year of his retirement.
(iv) His share of goodwill in the firm.
(v) His share in the profit/loss on revaluation of assets and liabilities.
Additional information:
(a) Paresh's share in the profits of the firm for the year 2016-17 was Rs. 20,000.
(b) Goodwill of the firm was valued at Rs. 24,000.
(c) The firm suffered a loss of Rs.12,000 on the revaluation of assets and liabilities.
(d) It was decided to transfer the amount due to Paresh to his loan account bearing interest @ 6% per annum. The loan was to be repaid in two equal annual instalments, the first instalment to be paid on 31st March, 2018.
You are required to prepare:
(i) Paresh's Capital Account.
(ii) Paresh's Loan Account till it is finally closed.
Solution
Paresh’s Capital A/c
| Particulars | Amount | Particulars | Amount |
| To Drawings | 5,000 | By Balance b/d | 80,000 |
| To Invest on Drawings | 100 | By IOC | 8,000 |
| To Revaluation | 4,800 | By P/L Appropriation A/c | 20,000 |
| To Paresh’s Loan A/c | 1,07,700 | By Harish’s Capital A/c | 8,000 |
| By Mahesh’s Capital A/c | 1,600 | ||
| 1,17,600 | 1,17,600 |
Paresh’s Loan A/c
| Date | Particulars | Amount | Date | Particulars | Amount |
| 31/3/2017 | To Balance c/d | 1,07,700 | 31/3/2017 | By Paresh’s Capital | 1,07,700 |
| 1,07,700 | 1,07,700 | ||||
| 31/3/2018 | To Bank | 60,312 | 1/4/2017 | By Balance b/d | 1,07,700 |
| 31/3/2018 | To Balanced c/d | 53,850 | 31/3/2018 | By IOL | 6,462 |
| 1,14,162 | 1,14,162 | ||||
| 31/3/2019 | To Bank | 57,081 | 1/4/2018 | By balance b/d | 53,850 |
| 31/3/2019 | By IOL | 3,231 | |||
| 57,081 | 57,081 |
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Liabilities |
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Assets |
Amount (₹) |
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Trade Creditors |
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Assets |
Amount (₹) |
|
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