### Retirement or Death of a partner - Test Papers

CBSE Test Paper 01

Retirement or Death of a partner
1. M, N and H are partners without partnership deed. M wants to get retired. The profit on revaluation on the date was ` 12000.and other partners N and H want to share this in the new ratio 3:2. M wants this to be shared equally How this profit should be shared
1. 6000 equally between each partner
2. 4000 equally between each partner
3. 8000 equally between each partner
4. 3000 equally between each partner
2. If any asset is taken over by a partner at the time of his retirement, how will you record it?
1. Balance Sheet
2. Revaluation Account
3. Cr. Side of his capital account
4. Dr. side of his capital account
3. New Ratio – Old Ratio = ?
1. New ratio of continuing partners
2. Both Sacrificing ratio and New ratio of continuing partners
3. Sacrificing ratio
4. Gain Ratio
4. Calculation of sharing of profit up to date of death will be calculated on the basis of
1. Yearly basis
2. Time basis
3. Turnover basis
4. Both Time basis and Turnover basis
5. There are some adjustments are to be done at the time of retiring partner
1. New profit sharing ratio of continuing partners
2. Accounting treatment of goodwill
3. Preparation of Executor’s Account
4. Adjustment of Reserves and Profits
Which of the above adjustments are to be done
1. b, c and d
2. a, c , b
3. a, b , c, d
4. a , b and d
6. State any two items of deductions that may have to be made from the amount of payable to a retiring partner.

7. Neetu, Meetu and Teetu were parents in a firm. On 1st January 2018, Meetu retired. On Meetu's retirement, the goodwill of the firm was valued at Rs.4,20,000. Pass necessary journal entry for the treatment of goodwill on Meetu's retirement.

8. Give the Journal entry to distribute the ‘Workmen Compensation Reserve’ of Rs.60,000 at the time of retirement of Vinod, when there is no claim against it. The has three partners.

9. X, Y and Z were partners sharing profits in the ratio of . X retired from the firm. Calculate the gaining ratio of the remaining partners.

10. Give the journal entry to distribute 'workmen compensation reserve’ of Rs 60,000 at the time of retirement of Sajjan, when there is no claim against it. The firm has three partners Rajat, Sajjan and Kavita.

11. P, Q, and R are partners sharing profits in the ratio of 4: 3: 1. P retires and his share is taken over by Q and R equally. Find the new profit sharing ratio of Q and R.

12. Meera, Sarthak and Rohit were partners sharing profits in the ratio of 2 : 2 : 1. On 31 March 2018, their Balance Sheet was as follows :

Balance Sheet of Meera, Sarthak and Rohit as at 31 March 2018

 Liabilities Amount (Rs.) Assets Amount (Rs.) Creditors 3,00,000 Fixed Assets 7,00,000 Contingency Reserve 1,00,000 Stock 2,00,000 Capital : Debtors 1,50,000 Meera 4,00,000 Cash at bank 3,50,000 Sarthak 4,00,000 Rohit 2,50,000 14,00,000 14,00,000

Sarthak died on 15th June, 2018. According to the partnership deed, his executors were entitled to : The firm’s profits for the last four years were : 2014 - 15 Rs.1,20,000, 2015 - 16 Rs.2,00,000, 2016 - 17 Rs.2,60,000 and 2017 - 18 Rs.2,20,000. Sarthak’s executors were paid the amount due immediately. Prepare Sarthak’s Capital Account to be presented to his executors.

1. Balance in his Capital Account.
2. His share of goodwill will be calculated on the basis of thrice the average of the past 4 years’ profits.
3. His share in profits up to the date of death on the basis of average profits of the last two years. The time period for which he survived in the year of death will be calculated in months.
4. Interest on capital @ 12% p.a. up to the date of his death.
13. X, Y, and Z are partners sharing profits and losses in the ratio of 4: 3: 2. Y retires and surrenders l/9th of his share in favour of X and the remaining in favour of Z. Calculate the new profit-sharing ratio and the gaining ratio.

14. Giriija, Yatin, and Zubin were partners sharing profits in the ratio 5 : 3 : 2. Zubin died on 1st August 2015. Amount due to Zubin’s executor after all adjustments was Rs.90,300. The executor was paid Rs.10,300 in cash immediately and the balance in two equal annual instalments with interest @ 6% p.a. starting from 31st March 2017. Accounts are closed on 31st March each year. Prepare Zubin’s Executors Account till he is finally paid.

15. Lalit, Madhur and Neena were partners sharing profits as 50%, 30% and 20% respectively. On 31st March, 2013 their balance sheet was as follows

Balance Sheet
as on 31st March, 2013

 Liabilities Amount(Rs) Assets Amount(Rs) Creditors 28,000 Cash 34,000 Provident Fund 10,000 Debtors 47,000 Investment Fluctuation Fund 10,000 (-) Provision for Doubtful Debts (3,000) 44,000 Capital A/cs Stock 15,000 Lalit 50,000 Investments 40,000 Madhur 40,000 Goodwill 20,000 Neena 25,000 1,1.5,000 Profit and Loss A/c 10,000 1,63,000======= 1,63,000=======

On this date, Madhur retired and Lalit and Neena agreed to continue on the following terms

1. The goodwill of the firm was valued at Rs 51,000.
2. There was a claim for workmen’s compensation to the extent of Rs 6,000
3. Investments were brought down to Rs 15,000.
4. Provision for bad debts was reduced by Rs 1,000.
5. Madhur was paid Rs 10,300 in cash and the balance was transferred to his loan account payable in two equal installments together with interest @ 12% per annum.

Prepare revaluation account, partners’ capital accounts and Madhur’s loan account till the loan is finally paid off.

CBSE Test Paper 01
Retirement or Death of a partner

1. 4000 equally between each partner, Explanation: In the absence of partnership deed profit sharing ratio will be equal. In this case, M is right; profit should be shared equally among the partners i.e. 4,000 equally among all the partners.
1. Dr. side of his capital account, Explanation: Any asset taken by the partner will be shown in the debit side of his capital account. It means his capital account will be reduced by the same.
1. Gain Ratio, Explanation: At the time of retirement or death of a partner, gain ratio of remaining partners is calculated as follows: New Ratio – Old Ratio = Gain Ratio
1. Both Time basis and Turnover basis, Explanation: Deceased partner’s share will be calculated on the basis of:
• Time
• Turnover
Note: Read the question carefully while calculating the share of profit of deceased partner.
1. a, b and d, Explanation: Following adjustments are done at the time of retirement of a partner:
• New profit sharing ratio of continuing partners
• Accounting treatment of goodwill
• Adjustment of Reserves and Profits
Note: Executor’s Account is prepared at the time of death of a partner.
1. His share of loss on revaluation of assets and reassessment of liabilities.
2. His share of existing goodwill written off or profit and loss dr balance given in balance sheet.
1. JOURNAL Entry

 Date Particulars LF Amt (Dr) Amt (Cr) Neetu's Capital A/c.......Dr. 70,000 Neetu's Capital A/c.......Dr. 70,000 To Meetu's Capital A/c (4,20,000 ×13$×\frac{1}{3}$) 1,40,000 (Being the adjustment made for goodwill on retirement.)
2.  Particulars LF Debit Amount Rs. Credit Amount Rs. Workmen Compensation Reserve A/c Dr. 60,000 To Kunwar’s Capital A/c ... 20,000 To Vinod’s Capital A/c ... 20,000 To Himanshu’s Capital A/c ... 20,000 (Being Workmen Compensation Reserve distributed to all the partners in their profit sharing ratio,e.g. 1:1:1, on the retirement of Vinod)
3. Old ratio of X : Y : Z == 5: 3: 2
X retired and there is no information regarding the new profit sharing ratio between y and z is given. So, after striking of the retiring partner's ratio, the remaining ratio will be new profit sharing ratio, i.e 3: 2
Hence, New profit sharing ratio of Y: Z = 3: 2
Gaining Ratio = New Profit Sharing Ratio - Old Profit Sharing Ratio
Y's Gaining Ratio = $\frac{3}{5}-\frac{3}{10}=\frac{6-3}{10}=\frac{3}{10}$,
Z's Gaining Raio = $\frac{2}{5}-\frac{2}{10}=\frac{4-2}{10}=\frac{2}{10}$
Hence, New profit sharing ratio of Y and Z = 3: 2.
4. JOURNAL

 Date Particulars L.F. Dr. (Rs.) Cr. (Rs.) Workmen Compensation Reserve A/c Dr. 60,000 To Rajat's Capital A/c 20,000 To Sajjan's Capital A/c 20,000 To Kavita's Capital A/c 20,000 (Being workmen compensation reserve distributed between old partners in their old profit sharing ratio, i.e. , 1 : 1 : 1 on the event of retirement of Sajjan.)
5. P’s share $\frac{4}{8}$ is being taken over by Q and R equally i.e., $\frac{2}{8}$ by Q and $\frac{2}{8}$ by R. as we know that gaining ratio = new ratio - old ratio so new ratio = old ratio so there gaining ratio = 2/8 taken by Q & 2/8 taken by R
Now, Q’s share would be $\frac{3}{8}+\frac{2}{8}=\frac{5}{8}$
R’s share would be $\frac{1}{8}+\frac{2}{8}=\frac{3}{8}$
Thus, the new profit sharing ratio between Q and R would be 5 : 3.
6. Sarthak's Capital Account

 Particulars Rs. Particulars Rs. To Sarthak's Executors A/c 6,58,750 By Balance b/d 3,50,000 By Interest on Capital A/c 8,750 By P & L Suspense A/c 20,000 (Balancing figure) By Meera's Capital A/c 1,60,000 By Rohit's Capital A/c 80,000 By Contingency Reserve A/c 40,000 6,58,750 6,58,750
Working:,
1. Sarthak's Share of Profit
$\frac{4,80,000}{2}=2,40,000×\frac{2.5}{12}×\frac{2}{5}=20,000$
2. Goodwill
Average profit = $\frac{1,20,000+2,00,000+2,60,000+2,20,000}{4}=\frac{8,00,000}{4}=$ 2,00,000
Goodwill = 2,00,000 x 3 = 6,00,000
Sarthak's Share of Goodwill = 6,00,000 x $\frac{2}{5}$ = 2,40,000
7. Calculation of New Profit Sharing Ratio:
XZ
(a)Their existing shares4/92/9
(b)Share surrendered by Y in favour of X: 1/9 $×$ 1/3 =1/27--
Share surrendered by Y in favour of Z: 8/9 $×$ 1/3 or *( y's share - his surrender share in favour of x i.e. 1/3 - 1/27 =8/27)...8/27
(c)New Share of X and Z(a + b):13/2714/27
(d)or New Share of X and Y1314
Calculation of Gaining Ratio: as we know that Gaining ratio = new ratio - old ratio so X gain =13/27 - 4/9 =1/27 & y gain = 14/27 - 2/9 = 8/27 so 1:8 or
Gaining Ratio = Share surrendered by Y: Share surrendered by Y in favour of X in favour of Z
= 1/27: 8/27
= 1: 8
8. Zubin's Executor's Loan A/c

 Date Particular (Rs.) Date Particulars (Rs.) 1.8.15 To Bank A/c 10,300 1.8.15 By Zubin's Capital A/c 90,300 31.3.16 To Balanced c/d 83,200 31.3.16 By Interest 3,200 93,500 93,500 31.3.17 To Bank A/c 48,000 1.4.16 By Balance b/d 83,200 " To Balance c/d 40,000 31.3.17 By Interest 4,800 88,000 88,000 31.3.18 To Bank A/c 42,400 1.4.17 By Balance b/d 40,000 31.3.18 By Interest 2,400 42,400 42,400
9. Revaluation Account

 Particulars Amount (Rs) Particulars Amount (Rs) To Workmen's Compensation Claim A/c 6,000 By Provision for Doubtful Debts 1,000 To Investments A/c 15,000 By Loss Transferred to Partners' Capital A/c Lalit 10,000 Madhur 6,000 Neena 4,000 20,000 21,000 ======= 21,000 =======

Partner's Capital Account

 Particulars Lalit Amount (Rs) Madhur Amount (Rs) Neena Amount (Rs) Particulars Lalit Amount (Rs) Madhur Amount (Rs) Neena Amount (Rs) To Profit and Loss A/c (loss) 5,000 3,000 2,000 By Balance b/d 50,000 40,000 25,000 To Goodwill A/c 10,000 6,000 4,000 By Lalit's Capital A/c (Goodwill) 10,929 To Revaluation A/c (Loss) 10,000 6,000 4,000 By Neena's Capital A/c(Goodwill) 4,371 To Madhur's Capital A/c (Goodwill) 10,929 4,371 To Cash A/c 10,300 To Madhur's Loan A/c 30,000 To Balance c/d 14,071 10,629 50,000 ====== 55,300 ====== 25,000 ====== 50,000 ====== 55,300 ======= 25,000 =======