Accounting for Partnership Firms- Fundamentals

1. Bose, Sarkar and Chatterjee are partners in a firm and do not have a Partnership Deed. Bose introduced further capital
of ₹ 5,00,000 on 1st October, 2021. Whereas Chatterjee took a loan of 50,000 from the firm on 1st October, 2021.
Disputes have arisen among them on the following issues:
I. Bose demands interest @ 10% p.a. on 5,00,000 being his extra capital.
II. Sarkar desires that his son Deep should be admitted as partner and he will give him half of his share. Bose and
Chatterjee do not agree.
III. Bose and Sarkar are of the view that Chatterjee should be charged interest on loan from the firm at the lending
rate of the banks, which is 12% p.a.
IV. Sarkar has withdrawn 50,000 from the firm for his personal use. Bose and Chatterjee are of the view that Sarkar
should be charged interest @ 10% p.a.
You are required to give solution to each issue of dispute.

2. Bat and Ball are partners sharing the profits in the ratio of 2:3 with capitals of ₹ 1,20,000 and ₹ 60,000 respectively.
On 1st October, 2021, Bat and Ball gave loans of 2,40,000 and 1,20,000 respectively to the firm. Bat had allowed
the firm to use his property for business for a monthly rent of ₹ 5,000. Loss for the year ended 31st March, 2022
before rent and interest amounted to 9,000. Show distribution of profit/loss.

3. X and Yare partners sharing profits in the ratio of 3:2 with capitals of 8,00,000 and 6,00,000 respectively. Interest
on capital is agreed @ 5% p.a. Y is to be allowed an annual salary of 60,000 which has not been withdrawn. Profit
for the year ended 31st March, 2022 before interest on capital but after charging Y's salary was 2,40,000.
A provision of 5% of the net profit is to be made in respect of commission to the Manager. Prepare Profit & Loss
Appropriation Account showing the allocation of profits.

4. Amit and Bramit started business on 1st April, 2021 with capitals of 15,00,000 and 9,00,000 respectively. On 1st
October, 2021, they decided that their capitals should be ₹ 12,00,000 each. The necessary adjustments in capitals
were made by introducing or withdrawing by cheque. Interest on capital is allowed @ 8% p.a. Compute interest on
capital for the year ended 31st March, 2022.

5. Moli and Bholi contribute 20,000 and 10,000 respectively towards capital. They decide to allow interest on capital
@ 6% p.a. Their respective share of profits is 2: 3 and profit for the year is 1,500. Show distribution of profits:
I. When there is no agreement except for interest on capitals; and
II. When there is an agreement that the interest on capital is a charge.

6. X and Y are partners in a firm. X is entitled to a salary of 10,000 per month and commission of 10% of the net profit
after partners' salaries but before charging commission. Y is entitled to a salary of 25,000 p.a. and commission of
10% of the net profit after charging all commission and partners' salaries. Net profit before providing for partners'
salaries and commission for the year ended 31st March, 2022 was ₹ 4,20,000. Show distribution of profit.

7. Ram and Mohan, two partners, drew for their personal use 1,20,000 and 80,000. Interest is chargeable @ 6% p.a.
on the drawings. What is the amount of interest chargeable from each partner?

8. A and B are partners sharing profits equally. A drew regularly 4,000 in the beginning of every month for six months
ended 30th September, 2021. Calculate interest on drawings @ 5% p.a. for a period of six months.

9. 43. Calculate the amount of Manan's drawings. Partnership Deed allows interest on drawings @ 10% p.a.:
I. If interest on drawings is ₹ 2,400 and he withdrew a fixed amount in the middle of each month.
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 II. If interest on drawings is If interest on drawings is ₹1,500 and he withdrew a fixed amount in the beginning
of each quarter.

10. The capital accounts of Tisha and Divya showed credit balances of 10,00,000 and 7,50,000 respectively after taking
into account drawings and net profit of 5,00,000. The drawings of the partners during the year 2021-22 were:
I. Tisha withdrew 25,000 at the end of each quarter.
II. 31st May, 2021 - ₹20,000; 1st November, 2021 - ₹17,500 and 1st February, 2022 - ₹12,500.
Calculate interest on partners' capitals @ 10% p.a. and interest on partners' drawings @ 6% p.a. for the year ended
31st March, 2022.

11. A and B are partners sharing profits and losses in the ratio of 3: 1. On 1st April, 2021, their capitals were: A 50,000
and B 30,000. During the year ended 31st March, 2022, the firm earned a net profit of ₹ 50,000. The terms of
partnership are:
I. Interest on capital is to be allowed @ 6% p.a.
II. A will get a commission @ 2% on turnover.
III. B will get a salary of 500 per month.
IV. B will get commission of 5% on profits after deduction of all expenses including such commission.
Partners' drawings for the year were: A 8,000 and B 6,000. Turnover for the year was 3,00,000. After considering
the above facts, you are required to prepare Profit & Loss Appropriation Account and Partners' Capital Accounts.

12. A, B and C were partners in a firm having capitals of ₹ 50,000; * 50,000 and 1,00,000 respectively. Their Current
Account balances were A: 10,000; B: 5,000 and C: 2,000 (Dr.). According to the Partnership Deed the partners were
entitled to an interest on Capital @ 10% p.a. C being the working partner was also entitled to a salary of 12,000 p.a.
The profits were to be divided as:
I. The first 20,000 in proportion to their capitals.
II. Next 30,000 in the ratio of 5:3:2.
III. Remaining profits to be shared equally.

The firm earned net profit of 1,72,000 before charging any of the above items. Prepare Profit & Loss Appropriation
Account and pass necessary Journal entry for the appropriation of profits.

13. Amit, Binita and Charu are three partners. On 1st April, 2021, their Capitals stood as: Amit 1,00,000, Binita 2,00,000
and Charu ₹3,00,000. It was decided that:
I. they would receive interest on Capitals @ 5% p.a.,
II. Amit would get a salary of 10,000 per month,
III. Binita would receive commission @ 5% of net profit after deduction of commission, and
IV. 10% of the net profit would be transferred to the General Reserve.
Before the above items were taken into account, profit for the year ended 31st March, 2022 was ₹5,00,000. Prepare
Profit & Loss Appropriation Account and the Capital Accounts of the Partners.

14. Kabir, Zoravar and Parul are partners sharing profits in the ratio of 5:3:2. Their capitals as on 1st April, 2021 were:
Kabir-5,20,000, Zoravar-3,20,000 and Parul-2,00,000. The Partnership Deed provided as follows:
I. Kabir and Zoravar each will get salary of ₹ 24,000 p.a.
II. Parul will get commission of 2% of Sales.
III. Interest on capital is to be allowed @ 5% p.a.
IV. Interest on Drawings is to be charged @ 5% p.a.
V. 10% of Divisible Profit is to be transferred to General Reserve.
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 Sales for the year ended 31st March, 2022 were 50,00,000. Drawings by each of the partners during the year was
60,000. Net Profit for the year was ₹1,55,500. Prepare Profit & Loss Appropriation Account for the year ended 31st
March, 2022.

15. X and Y entered into partnership on 1st April, 2018. Their capitals as on 1st April, 2021 were * 2,00,000 and 1,50,000
respectively. On 1st October, 2021, X gave 50,000 as loan to the firm. As per the provisions of ₹ the Partnership
Deed:
I. 20% of Profits before charging Interest on Drawings but after making appropriations was to be transferred
to General Reserve.
II. Interest on capital is to be allowed @ 12% p.a. and Interest on Drawings is to be charged @ 10% p.a.
III. X to get monthly salary of 5,000 and Y to get salary of 22,500 per quarter.
IV. X is entitled to a commission of 5% on sales. Sales for the year were ₹ 3,50,000.
V. Profit to be shared in the ratio of their capitals up to 1,75,000 and balance equally.
Profit for the year ended 31st March, 2022, before allowing or charging interest was 4,61,000. The drawings of X
and Y were 1,00,000 and 1,25,000 respectively.
Pass the necessary Journal entries relating to appropriation of profit. Prepare Profit & Loss Appropriation Account
and the Partners' Capital Accounts.

16. Simrat and Bir are partners in a firm sharing profits and losses in the ratio of 3:2. On 31st March, 2022 after closing
the books of account, their Capital Accounts stood at 4,80,000 and 6,00,000 respectively. On 1st May, 2021, Simrat
introduced an additional capital of 1,20,000 and Bir withdrew ₹ 60,000 from his capital. On 1st October, 2021,
Simrat withdrew 2,40,000 from her capital and Bir introduced ₹ 3,00,000. Interest on capital is allowed at 6% p.a.
Subsequently, it was noticed that interest on capital @ 6% p.a. had been omitted. Profit for the year ended 31st
March, 2022 amounted to 2,40,000 and the partners' drawings had been: Simrat- 1,20,000 and Bir- 60,000.
Compute the interest on capital if the capitals are (a) fixed, and (b) fluctuating.

17. Mita and Usha are partners in a firm sharing profits in the ratio of 2: 3. Their Capital Accounts as on 1st April, 2015
showed balances of 1,40,000 and 1,20,000 respectively. The drawings of Mita and Usha during the year 2015-16
were 32,000 and 24,000 respectively. Both the amounts were withdrawn on 1st January, 2016. It was subsequently
found that the following items had been omitted while preparing the final accounts for the year ended 31st March,
2016:
I. Interest on Capital @ 6% p.a.
II. Interest on Drawings @ 6% p.a.
III. Mita was entitled to a commission of 8,000 for the whole year.
Showing your working clearly, pass a rectifying entry in the books of the firm.

18. Naveen, Qadir and Rajesh were partners doing an electronic goods business in Uttarakhand. After the accounts of
partnership were drawn up and closed, it was discovered that interest on capital has been allowed to partners @6%
p.a. for the years ending 31st March, 2017 and 2018, although there is no provision for interest on capital in the
Partnership Deed. On the other hand, Naveen and Qadir were entitled to a salary of ₹ 3,500 and 4,000 per quarter
respectively, which has not been taken into consideration. Their fixed capitals were ₹ 4,00,000, ₹3,60,000 and
₹2,40,000 respectively. During the last two years they had shared the profits and losses as follows:
I. Year Ended 31st March, 2017 – 3:2:1.
II. Year Ended 31st March, 2018 – 5:3:2.
Pass necessary adjusting entry for the above adjustments in the books of the firm on 1st April, 2018. Show your
workings clearly.

19. Asgar, Chaman and Dholu are partners in a firm. Their Capital Accounts stood at ₹ 6,00,000; ₹ 5,00,000 and ₹
4,00,000 respectively on 1st April, 2021. They shared Profits and Losses in the proportion of 4:2:3. Partners are
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 entitled to interest on capital @ 8% per annum and salary to Chaman and Dholu @ ₹ 7,000 per month and 10,000
per quarter respectively as per the provision of the Partnership Deed.
Dholu's share of profit (excluding interest on capital but including salary) is guaranteed at a minimum of 1,10,000
p.a. Any deficiency arising on that account shall be met by Asgar. The profit for the year ended 31st March, 2022
amounted to ₹ 4,24,000.
Prepare Profit & Loss Appropriation Account for the year ended 31st March, 2022.

20. Ajay, Binay and Chetan were partners sharing profits in the ratio of 3:3:2. The Partnership Deed provided for the
following:
I. Salary of 2,000 per quarter to Ajay and Binay.
II. Chetan was entitled to a commission of 8,000.
III. Binay was guaranteed a profit of 50,000 p.a.
The profit of the firm for the year ended 31st March, 2015 was 1,50,000 which was distributed among Ajay, Binay
and Chetan in the ratio of 2:2: 1, without taking into consideration the provisions of Partnership Deed. Pass
necessary rectifying entry for the above adjustments in the books of the firm. Show your workings clearly.

21. Ankur, Bhavna and Disha are partners in a firm. On 1st April, 2021, the balances in their Capital Accounts stood at
14,00,000, 6,00,000 and 4,00,000 respectively. They shared profits in the proportion of 7:3:2 respectively. Partners
are entitled to interest on capital @ 6% per annum and salary to Bhavna @50,000 p.a. and a commission of 3,000
per month to Disha as per the provisions of the Partnership Deed. Bhavna's share of profit (excluding interest on
capital) is guaranteed at not less than 1,70,000 p.a. Disha's share of profit (including interest on capital but excluding
commission) is guaranteed at not less than ₹ 1,50,000 p.a. Any deficiency arising on that account shall be met by
Ankur. The profit of the firm for the year ended 31st March, 2022 amounted to 9,50,000.

22. Three Chartered Accountants Abhijit, Baljit and Charanjit form a partnership, profits being shared in the ratio of
3:2:1 subject to the following:
I. Charanjit's share of profit guaranteed to be not less than 15,000 p.a.
II. Baljit gives a guarantee to the effect that gross fee earned by him for the firm shall be equal to his average
gross fee of the preceding five years when he was carrying on profession alone, which on an average works
out at ₹ 25,000.
The profit for the first year of the partnership is 75,000. The gross fee earned by Baljit for the firm is ₹ 16,000.

Goodwill: Nature and Valuation

1. Profits for the five years ending 31st March, are as follows:
Year 2016- 4,00,000; Year 2017- 3,98,000; Year 2018- 4,50,000; Year 2019- 4,45,000 and Year 2020-5,00,000.
Calculate goodwill of the firm on the basis of 4 years' purchase of 5 years' average profit.

2. Calculate the value of firm's goodwill on the basis of one and half years' purchase of the average profit of the last
three years. The profit for first year was 1,00,000, profit for the second year was twice the profit of the first year
and for the third-year profit was one and half times of the profit of the second year.

3. Bhaskar and Pillai are partners sharing profits and losses in the ratio of 3: 2. They admit Kanika into partnership for
1/4th share in profit. Kanika brings her share of goodwill in cash. Goodwill for this purpose is to be calculated at
two years' purchase of the average normal profit of past three years. Profits of the last three years ended 31st
March, were:
a. 2018-Profit 50,000 (including profit on sale of assets ₹ 5,000).
b. 2019-Loss 20,000 (including loss by fire 30,000).
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 c. 2020-Profit 70,000 (including insurance claim received 18,000 and interest on investments and Dividend
received 8,000).
Calculate the value of goodwill. Also, calculate goodwill brought by Kanika.

4. Profits of a firm for the year ended 31st March for the last five years were:
31st March, 2016 - ₹ 20,000.
31st March, 2017 - ₹ 24,000.
31st March, 2018 - ₹ 30,000.
31st March, 2019 - ₹ 25000.
31st March, 2020 - ₹ 18,000.
Calculate value of goodwill on the basis of three years' purchase of Weighted Average Profit after assigning weights
1, 2, 3, 4 and 5 respectively to the profits for years ended 31st March, 2016, 2017, 2018, 2019 and 2020.

5. A business earned an average profit of ₹ 8,00,000 during the last few years. The normal rate of profit in the similar
type of business is 10%. The total value of assets and liabilities of the business were ₹ 22,00,000 and 5,60,000
respectively. Calculate the value of goodwill of the firm by super profit method if it is valued at 2½ years' purchase
of super profits.

6. Average net profit expected in future by XYZ firm is ₹ 36,000 per year. Average capital employed in the business by
the firm is ₹ 2,00,000. The normal rate of return from capital invested in this class of business is 10%. Remuneration
of the partners is estimated to be ₹ 6,000 p.a. Calculate the value of goodwill on the basis of two years' purchase
of super profit.

7. Average profit of a firm during the last few years is ₹ 2,00,000 and the normal rate of return in a similar business is
10%. If the goodwill of the firm is ₹ 2,50,000 at 4 years' purchase of super profit, find the capital employed by the
firm.

8. On 1st April, 2018, a firm had assets of $ 1,00,000 excluding stock of 20,000. The current liabilities were ₹ 10,000
and the balance constituted Partners' Capital Accounts. If the normal rate of return is 8%, the Goodwill of the firm
is valued of 60,000 at four years' purchase of super profit, find the actual profits of the firm.

9. A firm earns profit of 5,00,000. Normal Rate of Return in a similar type of business is 10%. The value of total assets
(excluding goodwill) and total outsiders' liabilities as on the date of goodwill are ₹ 55,00,000 and ₹ 14,00,000
respectively. Calculate value of goodwill according to Capitalisation of Super Profit Method as well as Capitalisation
of Average Profit Method.

Change in PSR Among the Existing Partner

1. A, B and C are partners sharing profits and losses in the ratio of 5:4:1. Calculate new profit-sharing ratio, sacrificing
ratio and gaining ratio in each of the following cases:
a. As per new agreement, C acquires 1/5th share from A.
b. As per new agreement, C acquires 1/5th share equally from A and B.
c. As per new agreement, A, B and C will share future profits and losses equally.
d. As per new agreement, C acquires 1/10th share of A and 1/2 share of B.

2. A and B are partners in a firm sharing profits in the ratio of 2: 1. They decided that with effect from 1st April, 2021,
they would share profits in the ratio of 3: 2. Goodwill appeared in the Balance Sheet on the same date $ 90,000.
Firm's goodwill was valued on the basis of aggregate of two years' profits preceding the date decision became
effective.
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 Profits for the years ended 31st March, 2020 and 2021 were 60,000 and 75,000 respectively. Pass necessary Journal
entries.

3. X, Y and Z are sharing profits and losses in the ratio of 5: 3:2. They decide to share future profits and losses in the
ratio of 2:3:5.
a. General Reserve - $ 6,000.
b. Profit & Loss A/c (Credit) - $ 24,000.
c. Advertisement Suspense A/c - $ 12,000.
Pass journal entry when:
a. They want to distribute.
b. They do not want to distribute.

4. Amar and Akbar are partners sharing profits in the ratio of 2:1. On 31st March, 2022, their Balance Sheet showed
General Reserve of $ 60,000. It was decided that in future they will share profits and losses in the ratio of 3: 2. Pass
necessary Journal entry in each of the following alternative cases:
a. When General Reserve is not to be shown in the new Balance Sheet.
b. When General Reserve is to be shown in the new Balance Sheet.

5. Nitin, Tarun and Amar are partners sharing profits equally and decide to share profits in the ratio of 2:2:1 w.e.f. 1st
April, 2022. The extract of their Balance Sheet as at 31st March, 2022 is as follows:
IFR ₹ 60,000; Investment (at cost) ₹ $ 4,00,000.
Pass the Journal entries in each of the following situations:
a. When its Market Value is not given;
b. When its Market Value is $ 4,00,000;
c. When its Market Value is $ 3,70,000;
d. When its Market Value is $ 4,24,000;
e. When its Market Value is $ 3,10,000.

6. Sonali, Soniya and Hrishita are partners sharing profits equally and decide to share profits in the ratio of 2:2:1 w.e.f.
1st April, 2022.
Workmen’s Compensation Reserve - $ 1,00,000.
Pass the Journal entries in each of the following situations:
a. When no information given about Claim.
b. Claim $ 0.
c. Claim $ 20,000.
d. Claim $ 70,000.
e. Claim $ 1,00,000.
f. Claim $ 1,20,000.

7. A, B and C are sharing profits and losses in the ratio of 2: 2: 1. They decided to share profit w.e.f. 1st April, 2022 in
the ratio of 5: 3:2. They also decided not to change the values of assets and liabilities in the books of account. The
book values and revised values of asset and liabilities as on the date of change were as follows:
Book Value Revised Value
Machinery $ 2,50,000 $ 3,00,000
Computers $ 2,00,000 $ 1,75,000
Sundry Creditors $ 90,000 $ 75,000
O/s Expenses $ 15,000 $ 25,000
Pass journal entries when:
a. They want to show old values in new Balance Sheet.
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 b. They want to show Revised values in new Balance Sheet.

8. Balance Sheet of X and Y, who share profits and losses as 5: 3, as at 1st April, 2022 is:

Liabilities $ Assets $
Capital Goodwill 8,000
X 52,000 Machinery 38,000
Y 54,000 1,06,000 Furniture 15,000
General Reserve 4,800 Sundry Debtors 33,000
WCR 10,000 Stock 7,000
EPF 1,000 Bank 25,000
Sundry Creditors 5,000 Adv Suspense 800
1,26,800 1,26,800

On the above date, they decided to change their profit-sharing ratio to 3:5 and agreed upon the following:
(a) Goodwill be valued on the basis of two years' purchase of the average profit of the last three years. Profits
for the years ended 31st March, are: 2020-7,500; 2021-4,000; 2022- 6,500.
(b) Machinery and Stock be revalued at 45,000 and 8,000 respectively.
(c) Claim on account of workmen compensation is $ 6,000.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the new firm.

Admission of a Partner

1. Raj, Ram and Ramesh are partners sharing profits and losses in the ratio of 5: 3:2. They admit Suresh into partnership
and give him 1/5th share of profits. Find the new profit-sharing ratio.

2. A and B are partners sharing profits and losses in the proportion of 7:5. They agree to admit C, their manager, into
partnership who is to get 1/6th share in the profits. He takes this share as 1/24th from A and 1/8th from B. Calculate
new profit-sharing ratio.

3. Mohan and Mahesh are partners in a firm sharing profits and losses in the ratio of 3: 2. Nusrat is admitted as partner
with 1/4 share in profit. Nusrat takes his share from Mohan and Mahesh in the ratio of 2:1. Calculate new profit-
sharing ratio.

4. Kabir and Farid are partners in a firm sharing profits and losses in the ratio of 7: 3. Kabir surrenders 2/10th from his
share and Farid surrenders 1/10th from his share in favour of Jyoti; the new partner. Calculate new profit-sharing
ratio and sacrificing ratio.

5. A, B and C are partners in the ratio of 1/2: 1/3: 1/6. D joins the firm as a new partner for 1/6th share in profits. C
would retain his original share.

6. Rakesh and Suresh are sharing profits in the ratio of 4:3. Zaheer joins and the new ratio among Rakesh, Suresh and
Zaheer is 7: 4: 3. Find out the sacrificing ratio.

7. A, B, C and D are in partnership sharing profits and losses in the ratio of 36: 24 20 20 respectively. E joins the
partnership for 20% share and A, B, C and D in future would share profits among themselves as 3/10: 4/10: 2/10:
1/10. Calculate new profit-sharing ratio after E's admission.
8. Amit and Vidya are partners sharing profits in the ratio of 3: 2. They admit Chintan into partnership who acquires
1/5th of his share from Amit and 4/25th share from Vidya. Calculate New Profit-sharing Ratio and Sacrificing Ratio.
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9. B and C are in partnership sharing profits and losses as 3: 1. They admit D as partner in the firm, D pays premium of
15,000 for 1/3rd share of the profits. As between themselves, B and C agree to share future profits and losses equally.
Draft Journal entries showing appropriations of the premium money.

10. A and B are in partnership sharing profits and losses in the ratio of 5: 3. C is admitted as a partner who pays 40,000
as capital and the necessary amount of goodwill which is valued at 60,000 for the firm. His share of profits will be
1/5th which he takes 1/10th from A and 1/10th from B.

11. Ram and Mohan are partners in a firm sharing profits in the ratio of 3: 2. On 1st April, 2022, they admit Sohan as a
partner for 1/4th share in the profits. Sohan contributed following assets towards his capital and for his share of
goodwill:
Stock: $ 60,000, Debtors: $ 80,000, Land; $ 1,00,000, P&M; $ 40,000
On the date of admission of Sohan, the goodwill of the firm was valued at $ 6,00,000.
Pass necessary Journal entries in the books of the firm on Sohan's admission if:
a. Partners do not withdraw the share of goodwill.
b. Partners withdraw half of their share of goodwill.

12. A and B are partners sharing profits and losses in the ratio of 3: 2. They admit C as partner in the firm for 1/4th share
in profits which he takes 1/6th from A and 1/12th from B. C brings 60% of his share of firm's goodwill. Goodwill of
the firm was valued at 1,00,000. Pass necessary Journal entries to record this arrangement.

13. On the admission of Rao, goodwill of Murty and Shah is valued at 30,000. Rao is to get 1/4th share of profits.
Previously Murty and Shah shared profits in the ratio of 3: 2. Rao is unable to bring amount of goodwill. Give Journal
entries in the books of Murty and Shah when: (a) Goodwill does not exist in the books; and (b) Goodwill exists in the
books at 10,000.

14. X and Y are partners with capitals of 50,000 each. They admit Z as a partner for 1/4th share in the profits of the firm.
Z brings in 80,000 as his share of capital. Profit & Loss Account showed a credit balance of 40,000 as on date of
admission of Z.

15. Pass entries in the firm's Journal for the following on admission of a partner:
a. Machinery be reduced by 16,000 and Building be appreciated by 40,000.
b. A provision be created for Doubtful Debts @ 5% of Debtors amounting to 80,000.
c. Provision for warranty claims be increased by $ 12,000.
d. Furniture (Book Value 50,000) is to be reduced by 40%.
e. Furniture (Book Value 50,000) is to be reduced to 40%.

16. Shyam and Sanjay were in partnership business sharing profits and losses in the ratio of 2:3. Their Balance Sheet as
at 31st March, 2022 was:
On 1st April, 2022, they admitted Shanker into partnership for 1/3rd share in future profits on the following terms:
Liabilities $ Assets $
Capital Building 40,000
Shyam 34,050 Furniture 4,400
Sanjay 34,050 Sundry Debtors 5,500
Sundry Creditors 12,435 Stock 18,000
Bank 11,925
Cash 710
80,535 80,535
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 a. Shanker is to bring in 30,000 as his capital and 20,000 as goodwill which is to remain in the business.
b. Stock and Furniture are to be reduced by 10%.
c. Building is to be appreciated by $ 15,000.
d. Provision of 5% is to be made on Sundry Debtors for Doubtful Debts.
e. Unaccounted Accrued Commission Income of 2,400 to be provided for. A debtor, whose dues of 4,800 were
written off as bad debts, paid 50% in settlement.
f. Outstanding Rent was 4,800.
Show Profit & Loss Adjustment Account (Revaluation Account), Capital Accounts of Partners and opening Balance
Sheet of the new firm.

17. A, B and C are partners sharing profits and losses in the ratio of 3: 2: 1. Their Balance Sheet as at 31st March, 2022 is
as follows:
Liabilities $ Assets $
Capital Building 50,000
A 60,000 Plant & Machinery 40,000
B 60,000 Furniture 30,000
C 40,000 Sundry Debtors 30,000
Sundry Creditors 30,000 Stock 20,000
Bills Payable 10,000 Bank 10,000
Bills Receivable 20,000
2,00,000 2,00,000

D is admitted as a partner on 1st April, 2022. His capital is to be $ 50,000. Following adjustments are agreed on D's
admission:
a. Out of the Creditors, 10,000 is due to D, it will be adjusted against his capital.
b. Advertisement Expenses of 1,200 are to be carried forward as Prepaid Expenses.
c. Expenses debited in the Profit & Loss Account includes 2,000 paid for B's personal expenses.
d. A Bill of Exchange of 4,000, which was previously discounted with the bank, was dishonoured on 31st March,
2022 but entry was not passed for dishonour.
e. Provision for Doubtful Debts @ 5% is to be created against Debtors. by A.
f. Expenses on Revaluation of 2,100 is paid by A.
Prepare necessary Ledger Accounts and Balance Sheet after D's admission.

18. Sushil and Satish are partners in a firm sharing profits in the ratio of 3: 2. Their Balance Sheet as at 31st March, 2022
was as follows:
Liabilities $ Assets $
Capital Plant & Machinery 40,000
Sushil 50,000 Debtors $ 80,000
Satish 60,000 Less: PFDD $ 4,000 76,000
Sundry Creditors 20,000 Stock 20,000
O/s Rent 13,000 P&L A/c 4,000
WCR 5,600 Cash 10,000
1,48,600 1,48,600

On 1st April, 2022, they admitted Samir as a partner for 1/6th share on the following terms:
a. Samir brings in 40,000 as his share of Capital but he is unable to bring any amount for Goodwill.
b. Claim on account of Workmen Compensation is ₹ 3,000.
c. To write off Bad Debts of 6,000.
d. Creditors are to be paid 2,000 more.
e. There being a claim against the firm for damages, liabilities to the extent of 2,000 should be created.
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 f. Outstanding rent be brought down to ₹ 11,200.
g. Goodwill is valued at 1½ years' purchase of the average profit of last 3 years, less 12,000. Profits for the last 3
years amounted to 10,000; 20,000 and ₹ 30,000.
Pass Journal entries, prepare Partners' Capital Accounts and opening Balance Sheet.
19. Rajesh and Ravi are partners sharing profits in the ratio of 3: 2. Their Balance Sheet at 31st March, 2022 stood as:
Liabilities $ Assets $
Capital Machinery 19,000
Rajesh 29,000 Debtors $ 9,400
Ravi 15,000 Less: PFDD $ 400 9,000
Sundry Creditors 38,500 Stock 15,000
O/s Rent 4,000 Cash 2,000
Prepaid Insurance 1,500
Building 35,000
Furniture 5,000
86,500 86,500

Raman is admitted as a new partner introducing a capital of 16,000. The new profit-sharing ratio is decided as 5: 3:2.
Raman is unable to bring in any cash for goodwill. So, it is decided to value the goodwill on the basis of Raman's share
in the profits and the capital contributed by him. Following revaluations are made:
a. Stock to decrease by 5%;
b. Provision for Doubtful Debts is to be $ 500;
c. Furniture to decrease by 10%;
d. Building is valued at 40,000.
Show necessary Ledger Accounts and Balance Sheet of new firm.

20. A and B are partners in a firm. Net profit of the firm is divided as follows: 1/2 to A, 1/3 to B and 1/6 carried to a
Reserve. They admit C as a partner on 1st April, 2022 on which date, the Balance Sheet of the firm was:
Liabilities $ Assets $
Capital Machinery 30,000
A 50,000 Debtors 22,000
B 40,000 Stock 18,000
Sundry Creditors 20,000 Bank 5,000
O/s Expense 5,000 Building 50,000
Reserve 10,000
1,25,000 1,25,000

Following are the required adjustments on admission of C:

a. C brings in 25,000 towards his capital.
b. C also brings in 5,000 for 1/5th share of goodwill.
c. Stock is undervalued by 10%.
d. Creditors include a liability of 4,000, which has been decided by the court at 3,200.
e. In regard to the Debtors, the following Debts proved Bad or Doubtful
$ 2,000 due from X-bad to the full extent;
$ 4,000 due from Y-insolvent, estate expected to pay only 50%.
You are required to prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.

21. Kalpana and Kanika were partners in a firm sharing profits in 3:1 ratio. They admitted Karuna as a partner for 1/4th
share in future profits. Karuna was to bring 60,000 for his capital. The Balance Sheet of Kalpana and Kanika as at 1st
April, 2022, the date on which C was admitted, was:
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 Liabilities $ Assets $
Capital Machinery 70,000
Kalpana 50,000 Debtors $ 35,000
Kanika 80,000 Less: PFDD $ 1,000 34,000
Sundry Creditors 70,000 Stock 30,000
Reserve 10,000 Cash 10,000
Building 40,000
Investment 26,000
2,10,000 2,10,000

The other terms agreed upon were:

a. Goodwill of the firm was valued at 24,000.
b. Land and Building were valued at 65,000 and Plant and Machinery at 60,000.
c. Provision for Doubtful Debts was found in excess by ₹ 400.
d. A liability of 1,200 included in Sundry Creditors was not payable.
e. The capitals of the partners be adjusted on the basis of Karuna's contribution of capital to the firm.
f. Excess or shortfall, if any, be transferred to Current Accounts.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.

22. On 31st March, 2022 the Balance Sheet of Ram and Shyam who share profits and losses in the ratio of 3:2 was as
follows:
Liabilities $ Assets $
Capital Machinery 1,42,500
Ram 1,50,000 Debtors $ 1,62,500
Shyam 1,00,000 Less: PFDD $ 12,500 1,50,000
Sundry Creditors 70,000 Stock 82,500
Reserve 25,000 Bank 25,000
Employees’
Provident Fund 55,000
4,00,000 4,00,000

They decided to admit Mahesh on 1st April, 2022 for 1/5th share which Mahesh acquired wholly from Shyam on the
following terms:
a. Mahesh shall bring $ 25,000 as his share of premium for Goodwill.
b. A debtor whose dues of 7,500 were written off as bad debt paid 5,000 in settlement.
c. A claim of $ 12,500 on account of workmen's compensation was to be provided for.
d. Machinery was undervalued by 5,000. Stock was valued 10% more than its market value.
e. Mahesh was to bring in capital equal to 20% of the combined capitals of Ram and Shyam after all adjustments.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.

23. A and B are partners in a firm. Their Balance Sheet as at 31st March, 2022 was:
Liabilities $ Assets $
Capital Machinery 38,600
A 50,000 Debtors $ 80,000
B 60,000 Less: PFDD $ 4,000 76,000
O/s Expense 3,000 Stock 20,000
WCR 5,600 Cash 10,000
Creditors 30,000 P&L A/c 4,000

1,48,600 1,48,600
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 On 1st April, 2022, they admitted C as a new partner on the following conditions:
a. C brings in $ 40,000 as his share of capital but he is unable to bring amount for goodwill.
b. New profit-sharing ratio between A, B and C will be 3: 2: 1.
c. Claim towards Workmen Compensation is ₹ 3,000.
d. Bad Debts amounting to6,000 are to be written off.
e. Creditors are to be paid 2,000 more.
f. 2,000 be provided for an unrecorded liability for damages.
g. Outstanding Expenses be brought down to ₹ 1,200.
h. Shikha, an old customer whose account was written off as bad debt has promised to pay 2,500 in settlement
of her dues.
i. Goodwill is valued at 1½ years' purchase of the average profit of last three years, less 12,000. The profits of
last three years amounted to 10,000; 20,000 and 30,000 respectively.
Prepare Revaluation Account, Capital Accounts of Partners and the Opening Balance Sheet.

24. A and B are partners sharing profits and losses equally. Their Balance Sheet as at 31st March, 2022 is given below:
Liabilities $ Assets $
Capital Machinery 2,00,000
A 3,00,000 Debtors $ 1,50,000
B 2,00,000 Less: PFDD $ 10,000 1,40,000
Current Stock 1,50,000
A 80,000 Bank 1,00,000
B 60,000 Land & Building 3,00,000
Bills Payable 1,00,000 Furniture & Fittings 50,000
Creditors 2,60,000 Bills Receivables 60,000

10,00,000 10,00,000

C is admitted as a partner for 1/4th share on 1st April, 2022, under the following terms:
a. C is to introduce 2,50,000 as capital.
b. Goodwill is agreed to have no value.
c. It is determined that the creditors of 15,000 were not to be paid.
d. Workmen Compensation Claim of 20,000 is to be accounted.
e. Provision for doubtful debts is to be @ 10% on debtors.
f. It was decided to henceforth follow Fluctuating Capital Accounts Method.
g. Bills accepted of 40,000 issued by creditors were not recorded in the books.
h. A provides 1,00,000 loan to the business carrying interest @ 12% p.a.
Prepare Revaluation Account, Partners' Current Accounts, Partners' Capital Accounts and Balance Sheet of the new
firm.

Retirement of a Partner

1. Gita, Radha and Garv were partners sharing profits in the ratio of 1/2, 2/5 and 1/10. Find the new ratio of the
remaining partners if Garv retires.

2. Om, Ram and Shanti are partners in a firm sharing profits and losses in the ratio of 4:3:2. Ram retires from the firm.
Calculate new profit-sharing ratio of Om and Shanti in the following circumstances:
a. If Ram gives his share to Om and Shanti in the original ratio of Om and Shanti.
b. If Ram gives his share to Om and Shanti in equal proportion.
c. If Ram gives his share to Om and Shanti in the ratio of 3:1.
12

d. If Ram gives his share to Om only.

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3. Shivam, Kapil and Deepak are partners sharing profits in the ratio of 3:1:2. On 31st March, 2022, Kapil retired and
his capital account after adjustments of reserve and profit on revaluation was ₹ 3,50,000. Shivam and Deepak paid
him 4,20,000 in settlement of his claim. To settle his account, a computer of $ 4,20,000 was given to Kapil. Pass the
necessary Journal entries in the books of the firm.

4. M, N and O are partners in a firm sharing profits in the ratio of 3:2:1. Goodwill has been valued at $ 60,000. On N's
retirement, M and O agree to share profits equally. Pass the necessary Journal entry for treatment of N's share of
goodwill.

5. A, B and C were partners in a firm sharing profits in the ratio of 6:5:4. Their capitals were A- 1,00,000; B-80,000 and
C- 60,000 respectively. On 1st April, 2009, A retired from the firm and the new profit-sharing ratio between B and
C was decided as 1:4. On A's retirement, the goodwill of the firm was valued at 1,80,000. Showing your calculations
clearly, pass the necessary Journal entry for the treatment of goodwill on A's retirement.

6. Sangeeta, Saroj and Shanti are partners sharing profits and losses in the ratio of 5:3:2. Shanti retired and on the
date of her retirement, following adjustments were agreed:
a. The value of Furniture is to be increased by 12,000.
b. The value of stock to be decreased by 10,000.
c. Machinery of the book value of 50,000 is to be reduced by 10%.
d. A Provision for Doubtful Debts @ 5% is to be created on debtors of book value of 40,000.
e. Unrecorded investment worth 10,000.
f. An item of 1,000 included in bills payable is not likely to be claimed, hence, should be written back.
Pass necessary Journal entries.

7. N, S and G were partners in a firm sharing profits and losses in the ratio of 2:3:5. On 31st March, 2016 their Balance
Sheet was as under:
Liabilities $ Assets $
Capital Plant & Machinery 40,000
N 2,25,000 Debtors $ 1,35,000
S 3,75,000 Less: PFDD $ 15,000 1,20,000
G 4,50,000 Stock 1,50,000
Sundry Creditors 1,65,000 P&L A/c 75,000
Reserve 90,000 Cash 1,20,000
Patents 90,000
Building 3,00,000
13,05,000 13,05,000

G retired on the above date and it was agreed that:

a. Debtors of 6,000 will be written off as bad debts and a provision of 5% on debtors for bad and doubtful debts
will be maintained.
b. Stock and machinery and building will be depreciated by 5%, Patents will be completely written off.
c. An unrecorded creditor of 30,000 will be taken into account.
d. N and S will share the future profits in 2:3 ratio.
e. Goodwill of the firm on G's retirement was valued at $ 90,000.
Pass necessary Journal entries for the above transactions in the books of the firm on G's retirement.

8. Chintan, Ayush and Sudha were partners in a firm sharing profits and losses in the ratio of 5: 3:2. On 31st March,
2019, their Balance Sheet was as follows:
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 Liabilities $ Assets $
Capital Plant & Machinery 90,000
Chintan 90,000 Debtors $ 60,000
Ayush 60,000 Less: PFDD $ 5,000 55,000
Sudha 40,000 Stock 30,000
Sundry Creditors 10,000 Cash at Bank 15,000
Reserve 20,000 Furniture 60,000
Provident Fund 30,000
2,50,000 2,50,000

Chintan retired on the above date and it was agreed that:

a. Debtors of ₹ 5,000 were to be written off as bad debts and a provision of 5% on debtors for bad and doubtful
debts was to be created.
b. Goodwill of the firm on Chintan's retirement was valued at 1,00,000 and Chintan's share of the same will be
adjusted by debiting the Capital Accounts of Ayush and Sudha.
c. Stock was revalued at 36,000.
d. Furniture was undervalued by $ 9,000.
e. Liability for Workmen's Compensation of 2,000 was to be created.
f. Chintan was to be paid 20,000 by cheque and the balance was to be transferred to his loan account.
Pass the necessary Journal entries in the books of the firm on Chintan's retirement.

9. On 31st March, 2022, the Balance Sheet of A, B and C who were sharing profits and losses in proportion to their
capitals stood as:
Liabilities $ Assets $
Capital Plant & Machinery 24,000
A 45,000 Debtors $ 10,000
B 30,000 Less: PFDD $ 200 9,800
C 15,000 Stock 9,000
Sundry Creditors 10,800 Cash at Bank 13,000
Bills Payable 5,000 Freehold Premises 50,000

1,05,800 1,05,800

B retired on 1st April, 2022 and following adjustments were agreed to determine the amount payable to B:
a. Out of the amount of insurance premium debited to Profit & Loss Account, 1,000 be carried forward as
prepaid Insurance.
b. Freehold Premises be appreciated by 10%.
c. Provision for Doubtful Debts is brought up to 5% on Debtors.
d. Machinery be reduced by 5%.
e. Liability for Workmen Compensation to the extent of 1,500 would be created.
f. Goodwill of the firm be fixed at 18,000 and B's share of the same be adjusted into the Capital Accounts of A
and C who will share future profits in the ratio of 3/4th and 1/4th.
g. Total capital of the firm as newly constituted be fixed at 60,000 between A and C in the proportion of 3/4th
and 1/4th after passing entries in their accounts for adjustments, i.e., actual cash to be paid or to be brought
in by continuing partners as the case may be.
h. B be paid 5,000 in cash and the balance be transferred to his Loan Account.
Prepare Capital Accounts of Partners and the Balance Sheet of the firm of A and C.

10. Leena, Madan and Naresh were partners in a firm sharing profits and losses in the ratio of 2:2:3. On 31st March,
2015, their Balance Sheet was as follows:
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 Liabilities $ Assets $
Capital Machinery 5,00,000
Leena 12,50,000 Debtors 4,00,000
Madan 8,00,000 Stock 8,00,000
Naresh 10,50,000 Bank 80,000
Sundry Creditors 1,60,000 Building 10,00,000
Bank Overdraft 44,000 Furniture 7,00,000
Long Term Debts 4,00,000 Investment 2,00,000
EPF 76,000 Deferred R. Expense 1,00,000
37,80,000 37,80,000

On 31st March, 2015, Madan retired from the firm and the remaining partners decided to carry on the business. It
was decided to revalue assets and liabilities as under:
a. Land and Building be appreciated by $ 2,40,000 and Machinery be depreciated by 10%.
b. 50% of Investments were taken over by the retiring partner at book value.
c. An old customer Mohit whose account was written off as bad debt had promised to pay $ 7,000 in settlement
of his full debt of 10,000.
d. Provision for Doubtful Debts was to be made at 5% on debtors.
e. Closing Stock will be valued at market price which is 1,00,000 less than the book value.
f. Goodwill of the firm be valued at 5,60,000 and Madan's share of goodwill be adjusted in the accounts of Leena
and Naresh. Leena and Naresh decided to share future profits and losses in the ratio of 3: 2.
g. The total capital of the new firm will be 32,00,000 which will be in the proportion of the profit-sharing ratio of
Leena and Naresh.
h. Amount due to Madan was settled by accepting a Bill of Exchange in his favour payable after 4 months.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the firm after Madan's retirement.

Death of a Partner

1. A, B and C are partners sharing profits and losses in the ratio of 4: 3: 2. C died. A takes 4/9 of C's share and balance
is taken by B. Calculate the new profit-sharing ratio and gaining ratio.

2. P, R and S are in partnership sharing profits 4/8, 3/8 and 1/8 respectively. It is provided in the Partnership Deed that
on the death of any partner his share of goodwill is to be valued at one-half of the net profit credited to his account
during the last four completed years.
R died on 1st January, 2022. The firm's profits for the last four years ended 31st December, were as: 2018-1,20,000;
2019-80,000; 2020-40,000; 2021-80,000.
a. Determine the amount that should be credited to R in respect of his share of Goodwill.
b. Pass Journal entry for adjustment of Goodwill.

3. Dinkar, Navita and Vani were partners sharing profits and losses in the ratio of 3: 2:1. Navita died on 30th June,
2017. Her share of profit for the intervening period was based on the sales during that period, which were $
6,00,000. The rate of profit during the past four years had been 10% on sales. The firm closes its books on 31st
March every year. Calculate Navita's share of profit.

4. Anil, Sunil and Hari were partners sharing profits equally. Sunil died on 31st December, 2020. In terms of the
partnership deed, accounts were prepared for the period ended 31st December, 2020 and net profit was
determined at 6,00,000. Pass the Journal entry for the profit share of the partners.

5. A, B and Care partners sharing profits and losses in the ratio of 3: 2:1. B died on 30th June, 2021. For the year ended
15

31st March, 2022, proportionate profit of 2021 is to be taken into consideration. During the year ended 31st March,
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 2022, bad debts of 2,000 had to be adjusted. Profit for the year ended 31st March, 2021 was 14,000 before
adjustment of bad debts. Calculate B's share of profit till the date of his death.

6. Ram, Manu and Hari were partners in a firm. Hari died on 30th June, 2022. His share of profit from the closure of
the last accounting year till the date of death was to be calculated on the basis of the average of three completed
financial years of profits before death. Profits for the years ended 31st March, 2020, 2021 and 2022 were $ 1,10,000;
1,20,000 and 1,30,000 respectively. Calculate Hari's share of profit till the date of his death and pass necessary
Journal entry for the same.

7. Raman, Param and Karan were partners sharing profits and losses in the ratio of 3: 2: 1. Param died on 31st
December, 2021. Accounts of the firm are closed on 31st March every year. Sales for the year ended 31st March,
2021 was 12,00,000 and sales for the nine months ended 31st December, 2021 was 6,00,000. Loss for the year
ended 31st March, 2021 was 90,000. Calculate deceased partner's share of profit/loss from the beginning of the
accounting year up to 31st December, 2021.

8. Iqbal and Kamal are in partnership sharing profits and losses in 3:2. Kamal died three months after the date of the
last Balance Sheet. According to the Partnership Deed, his legal heir is entitled to the following:
a. His capital as per the last Balance Sheet.
b. Interest on above capital @ 3% p.a. till the date of death.
c. His share of profit till the date of death calculated on the basis of last year's profits.
His drawings are to bear interest at an average rate of 2% on the amount irrespective of the period.
The net profits for the last three years, after charging insurance premium, were 20,000; 25,000 and 30,000
respectively. Kamal's capital as per Balance Sheet was 40,000 and his drawings till the date of death were 5,000.
Draw Kamal's Capital Account to be rendered to his representatives.

9. R, S and T were partners sharing profits and losses in the ratio of 5:3:2. On 31st March, 2018, their Balance Sheet
stood as:
Liabilities $ Assets $
Capital Machinery 1,50,000
R 1,50,000 Debtors 40,000
S 1,25,000 Stock 50,000
T 75,000 Bank 40,000
Sundry Creditors 40,000 Leasehold 1,00,000
Bills Payable 15,000 Patents 30,000
WCR 30,000 Goodwill 25,000

4,35,000 4,35,000

T died on 1st August, 2018. It was agreed that:

a. Goodwill be valued at 2½ years' purchase of average of last 4 years' profits which were: 2014-15: 65,000;
2015-16: 60,000; 2016-17: 80,000 and 2017-18: 75,000.
b. Machinery be valued at 1,40,000; Patents be valued at 40,000; Leasehold be valued at 1,25,000 on 1st
August, 2018.
c. For the purpose of calculating T's share in the profits of 2018-19, the profits in 2018-19 should be taken to
have accrued on the same scale as in 2017-18.
d. A sum of ₹ 21,000 to be paid immediately to the Executors of T and the balance to be paid in four equal
half-yearly instalments together with interest @ 10% p.a.
Pass necessary Journal entries to record the above transactions and T's Executors' Account.
16

10. The Balance Sheet of X, Y and Z as at 31st March, 2021 was:

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 Liabilities $ Assets $
Capital Machinery 6,500
X 22,750 Debtors 16,000
Y 15,250 Stock 9,000
Z 12,000 Bank 5,800
Loans 7,100 Building 30,000
Bills Payable 2,000 P&L A/c 6,000
WCR 6,000 Furniture 2,000
EPF 5,000 Bills Receivable 800
76,100 76,100
The profit-sharing ratio was 3:2:1. Z died on 31st July, 2021. The Partnership Deed provides that:
a. Goodwill is to be calculated on the basis of three years' purchase of the five years' average profit. The profits
for the years ended 31st March, were: 2021: 24,000; 2020: 16,000; 2019: 20,000; 2018: 10,000 and 2017:
5,000.
b. The deceased partner to be given share of profits till the date of death on the basis of profits for the previous
year.
c. The Assets have been revalued as: Stock 10,000; Debtors 15,000; Furniture 1,500; Plant and Machinery
5,000; Building 35,000. A Bill Receivable for 600 was found worthless.
d. A sum of 12,233 was paid immediately to Z's Executors and the balance to be paid in two equal annual
instalments together with interest @ 10% p.a. on the amount outstanding.
Give Journal entries and show the Z's Executors' Account till it is finally settled.

11. X, Y and Z were partners in a firm sharing profits and losses in the 5:4:3. Their Balance Sheet 31st March, 2021 was
as follows:
Liabilities $ Assets $
Capital Machinery 3,00,000
X 3,00,000 Debtors 80,000
Y 2,50,000 Bank 1,90,000
Z 1,50,000 Building 2,00,000
General Reserve 36,000 Adv suspense 1,20,000
Creditors 2,00,000 Furniture 1,10,000
IFR 14,000 Investment (MV 86000) 1,00,000
EPF 1,50,000
11,00,000 11,00,000
X died on 1st October, 2021 and Y and Z decide to share future profits in the ratio of 7:5. It was agreed between his
executors and the remaining partners that:
a. Goodwill of the firm be valued at 2½ years' purchase of average of four. completed years' profit which were:
Year Profits 2017-18 - $ 1,70,000, 2018-19 $ 1,80,000, 2019-20 $ 1,90,000, 2020-21 $ 1,80,000.
b. X's share of profit from the closure of last accounting year till date of death be calculated on the basis of
last year's profit.
c. Building undervalued by 2,00,000; Machinery overvalued by 1,50,000 and Furniture overvalued by $ 46,000.
d. A provision of 5% be created on Debtors for Doubtful Debts.
e. Interest on Capital to be provided at 10% p.a.
f. Half of the net amount payable to X's executor was paid immediately and the balance was transferred to
his loan account which was to be paid later.
Prepare Revaluation Account, X's Capital Account and X's Executor's Account as on 1st October, 2021. Note: Firm
enjoys bank overdraft facility.
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 Dissolution of a Partnership Firm

1. Pass Journal entries for the following at the time of dissolution of the firm of X and Y after the various assets (other
than cash) and outside liabilities have been transferred to Realisation Account:
a. Sale of Assets - $ 50,000.
b. Payment of Liabilities - $ 10,000.
c. A commission of 5% allowed to X, a partner, on sale of assets.
d. Realisation expenses were 15,000. The firm had agreed with Amrit, to reimburse him ₹ 10,000.
e. Employees Provident Fund $ 10,000.
f. Z, a debtor, whose account of 6,000 was written off as bad earlier, paid 60% of the amount.
g. Investment (Book Value 10,000) realised at 150%.
h. Realisation expenses were 10,000. The firm had agreed with Krishan, a partner, to reimburse him up to 7,500.

2. Simar, Raja and Rita were partners in a firm sharing profits and losses in the ratio of 2:2:1. The firm was dissolved on
31st March, 2019. After the transfer of assets (other than cash) and external liabilities to the Realisation Account, the
following transactions took place:
a. A debtor whose debt of 90,000 had been written off as bad, paid 88,000 in full settlement.
b. Creditors to whom 1,21,000 were due to be paid, accepted stock at $ 71,000 and the balance was paid to them
by a cheque.
c. Raja had given a loan to the firm of 18,000. He was paid 17,000 in full settlement of his loan.
d. Investments were 53,000 out of which investments worth 43,000 were taken over by Simar at $ 52,000 and the
balance of the investments were sold for 12,000.
e. Expenses on dissolution amounted to 19,000 and the same were paid by the firm.
f. Profit on dissolution amounted to ₹ 30,000.
Pass the necessary Journal entries for the above transactions in the books of the firm.

3. Shiv and Mohan were partners sharing profits in the ratio of 3: 2. Give Journal entries under following situation at the
time of dissolution of firm:
a. Workmen Compensation Reserve in the Balance Sheet was 75,000.
b. Workmen Compensation Reserve was 60,000 and liability for it was $ 35,000.
c. Workmen Compensation Reserve was $ 60,000 and liability was $ 75,000.
d. Workmen Compensation Reserve was ₹60,000 and liability was 60,000.
e. Workmen Compensation Reserve was nil and liability were $ 15,000.

4. Pass Journal entries for the following transactions:

a. Realisation expenses were 10,000.
b. Realisation expenses of 5,000 were paid by Taran, a partner.
c. Realisation expenses of 5,000 were paid by the firm on behalf of Madan, a partner.
d. Pawan, a partner was paid remuneration (including expenses) of 20,000 to carry out dissolution of the firm.
Actual expenses were 10,000. Expenses incurred were paid by Pawan.
e. Dissolution expenses were 8,000. Out of the said expenses, 3,000 were to be borne by the firm and the balance
by Ravi, a partner. 8,000 are paid by the firm.
f. Realisation expenses of ₹5,000 were to be borne and paid by Karan, a partner.
g. Manoj, a partner is to carry out dissolution of the firm at an agreed remuneration of10,000.
h. Dev, a partner, is paid remuneration of 15,000 for dissolution of the firm. Realisation expenses of 8,000 are paid
by the firm.
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 i. Realisation expenses of 5,000 were to be borne by Pavit, a partner. However, it was paid by Hitesh, another
partner. It was to be recorded in the books.

5. Pass necessary Journal entries on the dissolution of a partnership firm in the following cases:
a. L, a partner, was appointed to look after the dissolution process for which he was given remuneration of 10,000.
b. Dissolution expenses 8,000 were paid by the partner, M.
c. Dissolution expenses were 5,000.
d. P, a partner, was appointed to look after the process of dissolution for which he was allowed a remuneration of
7,000. P agreed to bear the dissolution expenses. Actual dissolution expenses 4,000 were paid by P.
e. N, a partner, was appointed to look after the process of dissolution for which he was allowed a remuneration of
9,000. N agreed to bear the dissolution expenses. Actual dissolution expenses ₹ 4,000 were paid by the firm.
f. Q, a partner, was appointed to look after the process of dissolution for which he was allowed a remuneration of
18,000. Q agreed to take over stock worth 18,000 as his remuneration. The stock had already been transferred
to Realisation Account.

6. Aman and Harsh were partners in a firm. They decided to dissolve their firm. Pass necessary Journal entries for the
following after assets (other than Cash and Bank) and outside liabilities have been transferred to Realisation Account:
a. There was furniture of 50,000. Aman took over 50% of the furniture at 10% discount and the remaining furniture
was sold at 30% profit on book value.
b. Profit & Loss Account was showing a credit balance of 15,000 on the date of dissolution.
c. Harsh's loan of $ 6,000 was settled by paying $ 5,500.
d. The firm paid realisation expenses of 5,000 on behalf of Harsh, a partner.
e. There was a bill for 1,200 under discount. The bill was received from Soham who became insolvent and a first
and final dividend of 25% was received from his estate.
f. Creditors, to whom the firm owed 6,000, accepted stock of 5,000 at a discount of 5% and the balance in cash.

7. Rohit, Kunal and Sarthak are partners in a firm. They decided to dissolve their firm. Pass necessary Journal entries for
the following after various assets (other than Cash and Bank) and the third-party liability have been transferred to
Realisation Account:
a. Kunal agreed to pay his wife's loan of ₹ 6,000.
b. Total Creditors of the firm were 40,000. Creditors worth 10,000 were given a piece of furniture costing $ 8,000
in full and final settlement. Remaining Creditors allowed a discount of 10%.
c. Rohit had given a loan of 70,000 to the firm which was duly paid.
d. A machine which was not recorded in the books was taken over by Kunal at 3,000, whereas its expected value
was 5,000.
e. The firm had a debit balance of 15,000 in the Profit & Loss Account on the date of dissolution.
f. Sarthak paid the realisation expenses of 16,000 out of his private funds, who was to get a remuneration of 15,000
for completing dissolution process and was responsible to bear all the realisation expenses.

8. Pass necessary Journal entries on the dissolution of a firm in the following cases:
a. Dharam, a partner, was appointed to look after the process of dissolution at a remuneration of $ 12,000 and he
had to bear the dissolution expenses. Dissolution expenses 11,000 were paid by Dharam.
b. Jay, a partner, was appointed to look after the process of dissolution and was allowed a remuneration of 15,000.
Jay agreed to bear dissolution expenses. Actual dissolution expenses $ 16,000 were paid by Vijay, another
partner on behalf of Jay.
c. Deepa, a partner, was to look after the process of dissolution and for this work she was allowed a remuneration
of ₹ 7,000. Deepa agreed to bear dissolution expenses. Actual dissolution expenses 6,000 were paid from the
firm's bank account.
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 d. Dev, a partner, agreed to do the work of dissolution for ₹ 7,500. He took away stock of the same amount as his
commission. The stock had already been transferred to Realisation Account.
e. Jeev, a partner, agreed to do the work of dissolution for which he was allowed a commission of 10,000. He
agreed to bear the dissolution expenses. Actual dissolution expenses paid by Jeev were $ 12,000. These expenses
were paid by Jeev by drawing cash from the firm.
f. A debtor of 8,000 already transferred to Realisation Account agreed to pay the realisation expenses of 7,800 in
full settlement of his account.

9. Pradeep and Rajesh were partners in a firm sharing profits and losses in the ratio of 3: 2. They decided to dissolve
their partnership firm on 31st March, 2018. Pradeep was deputed to realise the assets and to pay off the liabilities.
He was paid 1,000 as commission for his services. The financial position of the firm on 31st March, 2018 was as
follows:
Liabilities $ Assets $
Capital Goodwill 4,000
Pradeep 42,000 Debtors $ 34,000
Rajesh 42,000 Less: PFDD $ 4,000 30,000
Mrs. Pradeep’s Loan 40,000 Bills Receivable 37,400
Sundry Creditors 80,000 Cash at Bank 6,000
Rajesh’s Loan 24,000 P&L A/c 8,000
IFR 8,000 Building 1,20,000
Investment 30,600
2,36,000 2,36,000

Following terms and conditions were agreed upon:

a. Pradeep agreed to pay off his wife's loan.
b. Half of the debtors realised 12,000 and remaining debtors were used to pay off 25% of the creditors.
c. Investment sold to Rajesh for ₹ 27,000.
d. Building realised $ 1,52,000.
e. Remaining creditors were to be paid after two months; they were paid immediately at 10% p.a. discount.
f. Bill receivables were settled at a loss of ₹ 1,400.
g. Realisation expenses amounted to $ 2,500.
Prepare Realisation Account.

10. Ashish and Kanav were partners in a firm sharing profits and losses in the ratio of 3:2. On 31st March, 2018 their
Balance Sheet was as follows:
Liabilities $ Assets $
Capital Furniture 40,000
Ashish 1,20,000 Debtors 19,000
Kanav 80,000 Stock 24,000
Mrs. Ashish’s Loan 9,000 Cash at Bank 35,000
Sundry Creditors 42,000 P&L A/c 10,000
Kanav’s Loan 35,000 Plant 2,10,000
IFR 4,000 Investment 32,000
WCR 20,000
EPF 60,000

3,70,000 3,70,000

On the above date they decided to dissolve the firm.

a. Ashish agreed to take over furniture at 38,000 and pay off Mrs. Ashish's loan.
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b. Debtors realised $ 18,500 and plant realised 10% more.

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 c. Kanav took over 40% of the stock at 20% less than the book value. Remaining stock was sold at a gain of 10%.
d. Trade creditors took over investments in full settlement.
e. Kanav agreed to take over the responsibility of completing dissolution at an agreed remuneration of 12,000 and
to bear realisation expenses. Actual expenses of realisation amounted to ₹ 8,000.
Prepare Realisation Account.

11. Yogesh and Naresh were partners sharing profits equally. They dissolved the firm on 1st April, 2022. Naresh was
assigned the responsibility to realise the assets and pay the liabilities at a remuneration of ₹ 10,000 including
expenses. Balance Sheet of the firm as on that date was as follows:
Liabilities $ Assets $
Capital Debtors $ 40,000
Ashish 21,000 Less: PFDD $ 4,000 36,000
Kanav 21,000 Cash at Bank 6,000
Mrs. Yogesh’s Loan 42,000 Bills Receivable 33,400
Sundry Creditors 40,000 Adv Suspense 1,10,600
Naresh’s Loan 44,000 Investment 30,000
IFR 8,000
Bills Payable 40,000

2,16,000 2,16,000

The firm was dissolved on following terms:

a. Yogesh was to pay his wife's loan.
b. Debtors realised ₹ 30,000.
c. Naresh was to take investments at an agreed value of 26,000.
d. Creditors and Bills Payable were payable after two months but were paid immediately at a discount of 15% p.a.
e. Bills Receivable were received allowing 5% rebate.
f. A Debtor previously written off as Bad Debt paid 15,000.
g. An unrecorded asset realised 10,000.
Prepare Realisation Account, Partners' Capital Accounts, Partner's Loan Account and Cash/Bank Account.

12. Ashok, Babu and Chetan are in partnership sharing profit in the proportion of 1/2, 1/3, 1/6 respectively. They dissolve
the partnership on 31st March, 2022 when the Balance Sheet of the firm is as under:
Liabilities $ Assets $
Capital Debtors 58,000
Ashok 70,000 Stock 39,500
Babu 55,000 Cash at Bank 7,500
Chetan 27,000 Freehold Property 50,500
Current Machinery 48,000
Ashok 10,000 Investment 42,000
Babu 5,000
Chetan 3,000
Sundry Creditors 20,000
Bills Payable 25,500
Loan by Babu 30,000
2,45,500 2,45,500

The Machinery was taken over by Babu for 45,000, Ashok took over the Investment for $ 40,000 and Freehold
property took over by Chetan at 55,000. The remaining Assets realised as follows:
Sundry Debtors 56,500 and Stock 36,500. Sundry Creditors were settled at discount of 7%. An Office computer, not
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shown in the books of accounts realised 9,000. Realisation expenses amounted to ₹ 3,000.
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 Prepare Realisation Account, Partners' Capital Accounts and Bank Account.

13. Rita and Sobha are partners in a firm, Fancy Garments Exports, sharing profits and losses equally. On 1st April, 2022,
the Balance Sheet of the firm was:
Liabilities $ Assets $
Capital Debtors $ 66,000
Rita 90,000 Less: PFDD $ 6,000 60,000
Sobha 30,000 Bank 30,000
Reserve 24,000 Cash 6,000
Sundry Creditors 75,000 Plant and Machinery 45,000
Rita’s Loan 25,000 Land & Building 48,000
Bills Payable 30,000 Loan to Sobha 10,000
Stock 75,000
2,74,000 2,74,000

The firm was dissolved on the date given above. The following transactions took place:
a. Rita took 25% of the Stock at a discount of 20% in settlement of her loan.
b. Book Debts realised 54,000; balance of the Stock was sold at a profit of 30% on cost.
c. Sundry Creditors were paid out at a discount of 10%. Bills Payable were paid in full.
d. Plant and Machinery realised 75,000. Land and Building $ 1,20,000.
e. Rita took the goodwill of the firm at a value of 30,000.
f. An unrecorded asset of 6,900 was handed over to an unrecorded liability of 6,000 in full settlement.
g. Realisation expenses were $ 5,250.
Show Realisation Account, Partners' Capital Accounts and Bank Account in the books of the firm.

14. There are two partners Angad and Raman in a firm and their capitals are 50,000 and 40,000. The creditors are 30,000.
The assets of the firm realise 1,00,000. How much will Angad and Raman receive?

15. Priya, Komal and Rakhi were in partnership sharing profits and losses in the ratio of 2:1:1. They decided to 000 dissolve
the partnership. On that date of dissolution, Sundry Assets (including cash 5,000) amounted to 000 88,000, assets
realised 80,000 (including an unrecorded asset which realised 4,000). A contingent liability on account of bills
discounted 8,000 was paid by the firm. The Capital Accounts of Priya, Komal and Rakhi showed a balance of 20,000
each.
Prepare Realisation Account, Partners' Capital Accounts and Cash Account.

16. X and Y were partners sharing profits and losses in the ratio of 3: 2. They decided to dissolve the firm on 31st March,
2022. On that date, their Capitals were X-40,000 and Y-30,000. Creditors amounted to 24,000.
Assets were realised for 88,500. Creditors of 16,000 were taken over by X at 14,000. Remaining Creditors were paid
at 7,500. The cost of realisation came to ₹ 500.
Prepare necessary accounts. 22
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