Retirement Of Partner

Given below is a Balance Sheet of Aditya, Ajinkya, and Arun who were partners in a firm sharing profits and losses in the ratio 5:3:2. Their Balance Sheet as on 31st March 2020 was as follows:

$%5Cbegin%7Barray%7D%7B%7Cl%7Cr%7Cl%7Cr%7C%7D%20%5Chline%20%5Ctext%7BLiabilities%7D%20%26%20%5Ctext%7BAmount%20(%E2%82%B9)%7D%20%26%20%5Ctext%7BAssets%7D%20%26%20%5Ctext%7BAmount%20(%E2%82%B9)%7D%20%5C%5C%20%5Chline%20%5Ctext%7BCreditors%7D%20%26%2010%7B%2C%7D450%20%26%20%5Ctext%7BCash%7D%20%26%203%7B%2C%7D800%20%5C%5C%20%5Ctext%7BReserve%20Fund%7D%20%26%207%7B%2C%7D500%20%26%20%5Ctext%7BDebtors%7D%20%26%209%7B%2C%7D000%20%5C%5C%20%5Ctext%7BCapital%20Account%3A%7D%20%26%20%26%20%5Ctext%7BStock%7D%20%26%208%7B%2C%7D750%20%5C%5C%20%5Ctext%7BAditya%7D%20%26%2021%7B%2C%7D000%20%26%20%5Ctext%7BMachinery%7D%20%26%2050%7B%2C%7D000%20%5C%5C%20%5Ctext%7BAjinkya%7D%20%26%2018%7B%2C%7D500%20%26%20%5Ctext%7BFurniture%7D%20%26%202%7B%2C%7D500%20%5C%5C%20%5Ctext%7BArun%7D%20%26%2016%7B%2C%7D600%20%26%20%26%20%5C%5C%20%5Chline%20%5Ctext%7BTotal%3A%7D%20%26%2074%7B%2C%7D050%20%26%20%5Ctext%7BTotal%3A%7D%20%26%2074%7B%2C%7D050%20%5C%5C%20%5Chline%20%5Cend%7Barray%7D$

On 1st April 2020, Arun retired on the following terms:

$%5Cbegin%7Barray%7D%7Brl%7D%20%5Cbullet%20%26%20%5Ctext%7BGoodwill%20of%20the%20firm%20will%20be%20raised%20in%20the%20books%20at%20%E2%82%B9%2010%2C000.%7D%20%5C%5C%20%5Cbullet%20%26%20%5Ctext%7BStocks%20to%20be%20reduced%20by%2010%5C%25%2C%20Furniture%20by%205%5C%25%2C%20and%20Machinery%20by%2010%5C%25.%7D%20%5C%5C%20%5Cbullet%20%26%20%5Ctext%7BA%20provision%20of%205%5C%25%20R.D.D.%20to%20be%20maintained%20on%20debtors.%7D%20%5C%5C%20%5Cbullet%20%26%20%5Ctext%7B%E2%82%B9%20100%20to%20be%20written%20off%20from%20creditors.%7D%20%5C%5C%20%5Cbullet%20%26%20%5Ctext%7BAll%20the%20amount%20due%20to%20Arun%20will%20be%20transferred%20to%20his%20loan%20account.%7D%20%5C%5C%20%5Cend%7Barray%7D$

Prepare:

$%5Cbegin%7Barray%7D%7Brl%7D%20%5Cbullet%20%26%20%5Ctext%7B(a)%20Profit%20and%20Loss%20Adjustment%20Account%7D%20%5C%5C%20%5Cbullet%20%26%20%5Ctext%7B(b)%20Partners'%20Capital%20Account%7D%20%5C%5C%20%5Cbullet%20%26%20%5Ctext%7B(c)%20Balance%20Sheet%20of%20the%20new%20firm%7D%20%5C%5C%20%5Cend%7Barray%7D$

(a) Profit and Loss Adjustment Account

$%5Cbegin%7Barray%7D%7B%7Cl%7Cr%7Cr%7C%7D%20%5Chline%20%5Ctext%7BProfit%20and%20Loss%20Adjustment%20Account%7D%20%26%20%5Ctext%7BDr.%7D%20%26%20%5Ctext%7BCr.%7D%20%5C%5C%20%5Chline%20%5Ctext%7BTo%20Goodwill%20(Arun's%20share)%7D%20%26%20%E2%82%B9%5C%2C2000%20%26%20%5Ctext%7BBy%20Stock%20(Reduction)%7D~%E2%82%B9%5C%2C875%20%5C%5C%20%5Ctext%7BTo%20Stock%20(Reduction)%7D%20%26%20%E2%82%B9%5C%2C875%20%26%20%5Ctext%7BBy%20Furniture%20(Reduction)%7D~%E2%82%B9%5C%2C125%20%5C%5C%20%5Ctext%7BTo%20Machinery%20(Reduction)%7D%20%26%20%E2%82%B9%5C%2C5000%20%26%20%5Ctext%7BBy%20Machinery%20(Reduction)%7D~%E2%82%B9%5C%2C5000%20%5C%5C%20%5Ctext%7BTo%20Provision%20for%20R.D.D.%20(5%5C%25%20of%209000)%7D%20%26%20%E2%82%B9%5C%2C450%20%26%20%5Ctext%7BBy%20Creditors%20(Written%20off)%7D~%E2%82%B9%5C%2C100%20%5C%5C%20%5Chline%20%5Ctext%7BTotal%7D%20%26%20%E2%82%B9%5C%2C8325%20%26%20%E2%82%B9%5C%2C8000%20%5C%5C%20%5Chline%20%5Cend%7Barray%7D$

(b) Partners' Capital Account

$%5Cbegin%7Barray%7D%7B%7Cl%7Cr%7Cr%7C%7D%20%5Chline%20%5Ctext%7BPartners'%20Capital%20Account%7D%20%26%20%5Ctext%7BDr.%7D%20%26%20%5Ctext%7BCr.%7D%20%5C%5C%20%5Chline%20%5Ctext%7BTo%20Arun's%20Capital%20Account%7D%20%26%20%E2%82%B9%5C%2C16600%20%26%20%5Ctext%7BBy%20Balance%20b%2Fd%20(Aditya)%7D~%E2%82%B9%5C%2C21000%20%5C%5C%20%5Ctext%7BTo%20Arun's%20Loan%20Account%20(Remaining)%7D%20%26%20%E2%82%B9%5C%2C14600%20%26%20%5Ctext%7BBy%20Balance%20b%2Fd%20(Ajinkya)%7D~%E2%82%B9%5C%2C18500%20%5C%5C%20%5Chline%20%5Ctext%7BTotal%7D%20%26%20%E2%82%B9%5C%2C31200%20%26%20%E2%82%B9%5C%2C39500%20%5C%5C%20%5Chline%20%5Cend%7Barray%7D$

(c) New Balance Sheet of the Firm

$%5Cbegin%7Barray%7D%7B%7Cl%7Cr%7Cl%7Cr%7C%7D%20%5Chline%20%5Ctext%7BLiabilities%7D%20%26%20%5Ctext%7BAmount%20(%E2%82%B9)%7D%20%26%20%5Ctext%7BAssets%7D%20%26%20%5Ctext%7BAmount%20(%E2%82%B9)%7D%20%5C%5C%20%5Chline%20%5Ctext%7BCreditors%7D%20%26%2010%7B%2C%7D350%20%26%20%5Ctext%7BCash%7D%20%26%203%7B%2C%7D800%20%5C%5C%20%5Ctext%7BReserve%20Fund%7D%20%26%207%7B%2C%7D500%20%26%20%5Ctext%7BDebtors%7D%20%26%208%7B%2C%7D550%20%5C%5C%20%5Ctext%7BCapital%20Account%3A%7D%20%26%20%26%20%5Ctext%7BStock%7D%20%26%207%7B%2C%7D875%20%5C%5C%20%5Ctext%7BAditya%7D%20%26%2021%7B%2C%7D000%20%26%20%5Ctext%7BMachinery%7D%20%26%2045%7B%2C%7D000%20%5C%5C%20%5Ctext%7BAjinkya%7D%20%26%2018%7B%2C%7D500%20%26%20%5Ctext%7BFurniture%7D%20%26%202%7B%2C%7D375%20%5C%5C%20%5Ctext%7BArun's%20Loan%20Account%7D%20%26%2014%7B%2C%7D600%20%26%20%26%20%5C%5C%20%5Chline%20%5Ctext%7BTotal%3A%7D%20%26%2074%7B%2C%7D050%20%26%20%5Ctext%7BTotal%3A%7D%20%26%2074%7B%2C%7D050%20%5C%5C%20%5Chline%20%5Cend%7Barray%7D$

Final Answer: The Profit and Loss Adjustment Account reflects the adjustments made for goodwill, asset reductions, and provision for bad debts. The Partners' Capital Account includes the adjustments made for Arun's retirement, and the new Balance Sheet shows the final financial position of the firm post-retirement.

High-Yield Trend

Chapter Questions
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About Retirement Of Partner - MAHARASHTRA-CLASS-XII

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