## Class 12 Accountancy Chapter 4 – Reconstitution Of A Partnership Firm – Retirement/Death Of A Partner

### Class 12 Accountancy Chapter 4 – Reconstitution Of A Partnership Firm – Retirement/Death Of A Partner

Short Questions for NCERT Accountancy Solutions Class 12 Part 1 Chapter 4

1. What are the different ways in which a partner can retire from the firm?

#### 3. A partner can retire by giving a written notice to all other partners in absence.

2. Write the various matters that need adjustments at the time of retirement of partner/partners.

At the time of retirement of partner/partners, following matters needs adjustment:

1. Determining new gaining ratio of the partners who are remaining in the firm.

2. Determine new ratio of firms remaining partners.

3. Determine goodwill of the firm and ensure its proper accounting treatment

4. Revaluating liabilities and assets of the new firm.

5. Distributing among all the partners the accumulated profits and losses, along with reserves.

6. Retiring partner’s settlement

7. Revised calculation of capital accounts of remaining partners and their new and updated profit sharing ratio.

8. Joint life policy treatment.

3. Distinguish between sacrificing ratio and gaining ratio.

 Basis of Difference Sacrificing ratio Gaining Ratio 1. Meaning The ratio where a partner of a firm agree to sacrifice the profit share and make it available for new partner. That ratio in which a partner obtains the profit share from the partner who is leaving the firm. 2. Calculation Calculated as difference between old and new ratio Calculated as difference between new and old ratio 3. Time Calculation done at the admission of a new partner Calculation done at the retirement/death of a partner. 4. Objective It is used to determine the profit and loss share that is sacrificed by the current partners at the time of joining of new partner. It is used to determine profit and loss share that is obtained by the existing partners when a partner retires/becomes deceased 5. Effect Existing partners profit share is reduced Continuing partner profit share is increased.

4. Why do firm revaluate assets and reassess their liabilities on retirement or on the event of death of a partner?

As a partner retires or is taken away by death, it becomes critical to determine the liabilities and assets value on the current date to get a fair idea about its true worth. Revaluation becomes essential as liabilities and assets may increase or decrease in value as time passes. It may also happen that certain liabilities and assets had remained unrecorded the last time books are updated. As a partner retires/ death happens, it may have a positive/negative impact on the value of firm’s liabilities and assets. Therefore, it is a good idea to revaluate the value so that the true profit/loss can be determined so that it can be share d among partners as per sharing ratio as determined at the time of setting up partnership.

5. Why a retiring/deceased partner is entitled to a share of goodwill of the firm?

A firm earns goodwill by the efforts of the partners and is regarded as one of the most important intangible asset. After a partner retires or is dead, the good work that was done by that partner should be acknowledged and hence a proper compensation should be provided to the partner in form of a part of goodwill of firm.

Long Questions for NCERT Accountancy Solutions Class 12 Part 1 Chapter 4

1. Explain the modes of payment to a retiring partner.

Payment modes are discussed below:

1. When amount due to retiring partner is paid back in a lump sum amount, on the day of retirement, journal entries are as mentioned below

 Retiring Partner’s Capital A/c Dr. To Cash/Bank A/c (Payment made to the retired partner)

2. Amount to be paid to retiring partner can be paid in installments to the loan account, which helps partner earn interest on loan.

 Retiring Partner’s Capital A/c Dr. To Retiring Partner’s Loan A/c (Capital account balance of Retiring partner transferred to account to the Loan account of retiring partner).

3. Part Payment: When the retiring partner needs to be paid some amount in cash and some as equal installments, then a certain sum of money is paid on day of retirement and rest of the sum is paid on a monthly basis to partners loan account. Following entries help show this type of transaction.

Retiring Partner’s Capital A/c (total due amount payable to partner) Dr.

To Retiring Partner’s Loan A/c (amount transferred to loan account)

To Cash A/c (part payment in form of cash)

(Part payment to retiring partner in cash as well as transfer to loan account)

2. How will you compute the amount payable to a deceased partner?

To determine the amount payable to the deceased partner, the legal executor is entitled to calculate that. It is arrived at posting these items in debit and credit side respectively.

Items to be posted on debit side:

1. Credit balance of deceased partner’s capital account.

2. Profit share of the partner till his/her death

3. Share of goodwill of the partner.

4. Any gain on revaluation of liabilities and assets

5. Any salary or commission earned, till the date of demise.

6. Share in accumulated reserves and profit account

7. Any interest earned on capital

8. Share in life insurance policy

Items to be posted on credit side:

1. Deceased Partners debit balance from capital account.

2. Total drawings done till death of partner

3. Interest charged on drawings if any till the day of death.

4. Reduction in profit share or loss up to date of death.

5. Share of accumulated loss for the partner and firm

A legal executor balances excess of credit over the debit side of a deceased partner.

 Deceased Partner’s Capital Account Dr. Cr. Date Particulars J.F. Amount₹ Date Particulars J.F. Amount₹ Revaluation A/c (Loss) Balance b/d Profit and Loss Suspense A/c(Loss share till the date of death) Profit and Loss Suspense A/c(Share of profit up to the date of the death) Goodwill Accumulated Losses A/c Reserves and Profits Goodwill A/c (Written off) Revaluation A/c (gain) Partner Executor’s A/c Joint Life Policy A/c (Balancing Figure) Interest on Capital A/c Salary A/c Commission A/c

3. Explain the treatment of goodwill at the time of retirement or on the event of death of a partner?

Goodwill is subjected to treatment on these two conditions:

1. When goodwill is present in the books of firm.

2. When goodwill is not present in books of the firm

1. When goodwill is present in books

The first step is to write off the goodwill if it is present in the books and must be distributed among the partners in the firm in the agreed profit sharing ratio. The journal entry will be like:

All Partners’ Capital A/c Dr.

To Goodwill A/c

(Goodwill written off among partners)

The next step will be adjusting goodwill using partners’ capital account with the share of goodwill of the deceased or retired partner

Remaining Partner’s Capital A/c Dr.

To Retiring/Deceased Partner’s Capital A/c (partners’ capital account debited and retiring/deceased partners account credited)

2. When goodwill is not present in books of the firm

As goodwill is not present in the books of firm, it gets adjusted from the partners’ capital account along with the deceased/retired partners share. Following entry is passed:

Remaining Partner’s Capital A/c Dr.

To Retiring/Deceased Partner’s Capital A/c

(Partners’ capital account debited and retiring/deceased partners account credited)

4. Discuss the various methods of computing the share in profits in the event of death of a partner.

In the unlikely event of the death of a partner during the year, the executor is entitled for a profit sharing up to the date of death of the partner. Profit sharing can be calculated by two methods:

1. On Time Basis: In this method, profit earned till the date of partners death is considered for calculation on the basis of last year/year’s profit or average profit earned in last few years. It is assumed that profit will remain constant throughout the year and the deceased partner will be eligible for profit share which is proportionate till the date of partner’s death.

Share of Deceased Partner in Profit =

2) On the sale basis: Calculation of profit is based on last year’s sale as per this method and also it is assumed that net profit of current year is similar to last year’s profits.

Share of Deceased Partner’s Profit =
×Sales counted from the beginning of the current year up to the date of death × Share of deceased partner

Numerical Questions for NCERT Accountancy Solutions Class 12 Part 1 Chapter 4

1. Aparna, Manisha and Sonia are partners sharing profits in the ratio of 3:2:1. Manisha retires and goodwill of the firm is valued at ₹ 1, 80,000. Aparna and Sonia decided to share future in the ratio of 3:2. Pass necessary Journal entries.

 Books of Aparna, and Sonia  Journal Date Particulars L.F. Amount₹ Amount₹ Aparna’s Capitals A/c Dr. 18,000 Sonia’s Capital A/c Dr. 42,000 To Manisha’s Capital A/c 60,000 (Manisha’s share of goodwill adjusted to Aparna’s andSonia’s Capital Account in their gaining ratio )

Working Notes:

1. Manisha’s share in goodwill:

Total goodwill of the firm × Retiring Partner’s Share =

2. Gaining Ratio = New Ratio − Old Ratio

Aparna Gaining share

Gaining Ratio between Aparna and Sonia = 3: 7

3. Aparna’s share in goodwill

Sonia’s share in goodwill

2. Sangeeta, Saroj and Shanti are partners sharing profits in the ratio of 2:3:5. Goodwill is appearing in the books at a value of ₹ 60,000. Sangeeta retires and goodwill is valued at ₹ 90,000. Saroj and Shanti decided to share future profits equally. Record necessary Journal entries.

 Books of Saroj and Shanti  Journal Date Particulars L.F. Amount₹ Amount₹ Sangeeta’s Capital A/c Dr. 12,000 Saroj’s Capital A/c Dr. 18,000 Shanti’s Capital A/c Dr. 30,000 To Goodwill A/c 60,000 (Goodwill written off) Saroj’s Capital A/c Dr. 18,000 To Sangeeta’s Capital A/c 18,000 (Sangeeta’s share of goodwill adjusted to Saroj’s CapitalAccount in her gaining ratio)

Working Notes:

1. Sangeeta’s share of goodwill.

Total goodwill of the firm ´ Retiring Partner’s share

2. Gaining Ratio = New Ratio – Old Ratio

Saroj’s Gaining Share

Shanti’s Gaining Share

3. Himanshu, Gagan and Naman are partners sharing profits and losses in the ratio of 3:2:1. On March 31, 2017, Naman retires.

The various liabilities and assets of the firm on the date were as follows:

Cash ₹ 10,000, Building ₹ 1, 00,000, Plant and Machinery ₹ 40,000, Stock ₹ 20,000, Debtors ₹ 20,000 and Investments ₹ 30,000.

The following was agreed upon between the partners on Naman’s retirement:

 (i) Building to be appreciated by 20%. (ii) Plant and Machinery to be depreciated by 10%. (iii) A provision of 5% on debtors to be created for bad and doubtful debts. (iv) Stock was to be valued at ₹ 18,000 and Investment at ₹ 35,000.

Record the necessary journal entries to the above effect and prepare the Revaluation Account.

 Books of Himanshu and Gagan  Journal Date Particulars L.F. Amount₹ Amount₹ Building A/c Dr. 20,000 Investment A/c Dr. 5,000 To Revaluation A/c Dr. 25,000 (Value of Building and Investment increased at the timeof Naman’s retirement) Revaluation A/c Dr. 7,000 To Plant and Machinery A/c 4,000 To Provision for Bad and Doubt Debts A/c 1,000 To Stock A/c 2,000 (Assets revalued and Provision for Bad and Doubtful Debtsmade at the time of Naman’s retirement) Revaluation A/c Dr. 18,000 To Himanshu’s Capital A/c 9,000 To Gagan’s Capital A/c 6,000 To Naman’s Capital A/c 3,000 (Profit on revaluation transferred to all Partners’ CapitalAccounts in their old profit sharing ratio)
 Revaluation Account Dr. Cr. Particular Amount₹ Particular Amount₹ Plant and Machinery 4,000 Building 20,000 Stock 2,000 Investment 5,000 Provision for Bad and Doubtful Debts 1,000 Profit transferred to Capital Account: Himanshu 9,000 Gagan 6,000 Naman 3,000 18,000 25,000 25,000

4. Naresh, Raj Kumar and Bishwajeet are equal partners. Raj Kumar decides to retire. On the date of his retirement, the Balance Sheet of the firm showed the following: General Reserve’s ₹ 36,000 and Profit and Loss Account (Dr.) ₹ 15,000.

Pass the necessary journal entries to the above effect.

 Books of Naresh and Bishwajeet  Journal Date Particulars L.F. Amount₹ Amount₹ General Reserve A/c Dr. 36,000 To Naresh’s Capital A/c 12,000 To Raj Kumar’s Capital A/c 12,000 To Bishwajeet’s Capital A/c 12,000 (General Reserve distributed among old partner in old ratio) Naresh’s Capital A/c Dr. 5,000 Raj Kumar’s Capital A/c Dr. 5,000 Bishwajeet’s Capital A/c Dr. 5,000 To Profit and Loss A/c 15,000 (Debit balance of Profit and Loss Account written off)

5. Digvijay, Brijesh and Parakaram were partners in a firm sharing profits in the ratio of 2:2:1. Their Balance Sheet as on March 31, 2017 was as follows:

 Liabilities Amount₹ Assets Amount₹ Creditors 49,000 Cash 8,000 Reserves 18,500 Debtors 19,000 Digvijay’s Capital 82,000 Stock 42,000 Brijesh’s Capital 60,000 Buildings 2,07,000 Parakaram’s Capital 75,500 Patents 9,000 2,85,000 2,85,000

Brijesh retired on March 31, 2017 on the following terms:

(i)    Goodwill of the firm was valued at ₹ 70,000 and was not to appear in the books.

(ii)   Bad debts amounting to ₹ 2,000 were to be written off.

(iii)  Patents were considered as valueless.

Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of Digvijay and Parakaram after Brijesh’s retirement.

 Books of Digvijay and Parakaram  Revaluation Account Dr. Cr. Particular Amount₹ Particular Amount₹ Bad Debts 2,000 Patents 9,000 Loss transferred to Capital Account: Digvijay 4,400 Brijesh 4,400 Parakaram 2,200 11,000 11,000
 Partners’ Capital Account Dr. Cr. Particularss Digvijay Brijesh Parakaram Particularss Digvijay Brijesh Parakaram Brijesh’s Capital A/c 18,667 9,333 Balance b/d 82,000 60,000 75,500 Revaluation (Loss) 4,400 4,400 2,200 Digvijay’s Capital A/c 18,667 Brijesh’s Loan 91,000 Parakaram’s Capital A/c 9,333 Balance c/d 66,333 67,667 Reserves 7,400 7,400 3,700 89,400 95,400 79,200 89,400 95,400 79,200
 Balance Sheet as on March 31, 2017 Liabilities Amount₹ Assets Amount₹ Creditors 49,000 Cash 8,000 Brijesh’s Loan 91,000 Debtors 19,000 Less: Bad Debts 2,000 17,000 Digvijay’s Capital A/c 66,333 Stock 42,000 Parakaram’s Capital A/c 67,667 Buildings 2,07,000 2,74,000 2,74,000

Note: As sufficient balance is not available to pay the amount due to Brijesh, the balance of his Capital Account transferred to his Loan Account.

Working Note:

1. Brijesh’s Share of Goodwill

Total goodwill of the firm ´ Retiring Partner’s Share

2. Gaining Ratio = New Ratio – Old Ratio

Digvijay’s Share

Parakaram’s Share

Gaining ratio between Digvijay and Parakaram = 4: 2 or 2: 1

6. Radha, Sheela and Meena were in partnership sharing profits and losses in the proportion of 3:2:1. On April 1, 2017, Sheela retires from the firm. On that date, their Balance Sheet was as follows:

 Liabilities Amount₹ Assets Amount₹ Trade Creditors 3,000 Cash-in-Hand 1,500 Bills Payable 4,500 Cash at Bank 7,500 Expenses Owing 4,500 Debtors 15,000 General Reserve 13,500 Stock 12,000 Capitals: Factory Premises 22,500 Radha 15,000 Machinery 8,000 Sheela 15,000 Losse Tools 4,000 Meena 15,000 45,000 70,500 70,500

The terms were:

a) Goodwill of the firm was valued at ₹ 13,500.

b) Expenses owing to be brought down to ₹ 3,750.

c) Machinery and Loose Tools are to be valued at 10% less than their book value.

d) Factory premises are to be revalued at ₹ 24,300.

Prepare:

1. Revaluation account

2. Partner’s capital accounts and

3. Balance sheet of the firm after retirement of Sheela.

 Books of Radha and Meena  Revaluation Account Dr. Cr. Particulars Amount₹ Particulars Amount₹ Machinery 800 Expenses Owing 750 Loose Tools 400 Factory Premises 1,800 Profit transferred to Capital Account: Meena 675 Radha 450 Sheela 225 1,350 2,550 2,550
 Parters’ Capital Account Dr. Cr. Particulars Radha Sheela Meena Particulars Radha Sheela Meena Sheela’s Capital A/c 3,375 1,125 Balance b/d 15,000 15,000 15,000 Sheela’s Loan A/c 24,450 General Reserve 6,750 4,500 2,250 Balance c/d 19,050 16,350 Revaluation (Profit) 675 450 225 Radha’s Capital A/c 3,375 Meena’s Capital A/c 1,125 22,425 24,450 17,475 22,425 24,450 17,475
 Balance Sheet as on April 01, 2017 Liabilities Amount₹ Assets Amount₹ Trade Creditors 3,000 Cash in Hand 1,500 Bills Payable 4,500 Cash at Bank 7,500 Expenses Owing 3,750 Debtors 15,000 Sheela’s Loan 24,450 Stock 12,000 Factory Premises 24,300 Capitals: Machinery 8,000 Radha 19,050 Less: 10% (800) 7,200 Meena 16,350 35,400 Loose Tools 4,000 Less: 10% (400) 3,600 71,100 71,100

Working Notes:

Working Notes:

1) Sheela’s share of goodwill

Total goodwill of the firm × Retiring Partner’s share =13,500×26=4, 50013x, 500×26=4,500

2) Gaining Ratio = New Ratio − Old Ratio

Meena’s Shares

Gaining Ratio between Radha and Meena = 6 : 2 or 3 : 1

7. Pankaj, Naresh and Saurabh are partners sharing profits in the ratio of 3:2:1. Naresh retired from the firm due to his illness. On that date the Balance Sheet of the firm was as follows:

 Books of Pankaj, Naresh and Saurabh Balance Sheet as on March 31, 2017 Liabilities Amount ₹ Assets Amount ₹ General Reserve 12,000 Bank 7,600 Sundry Creditors 15,000 Debtors 6,000 Bills Payable 12,000 Less: Provision for Doubtful Debt 400 5,600 Outstanding Salary 2,200 Provision for Legal Damages 6,000 Stock 9,000 Capitals: Furniture 41,000 Pankaj 46,000 Premises 80,000 Naresh 30,000 Saurabh 20,000 96,000 1,43,200 1,43,200

(i) Premises have appreciated by 20%, stock depreciated by 10% and provision for doubtful debts was to be made 5% on debtors. Further, provision for legal damages is to be made for ₹ 1,200 and furniture to be brought up to ₹ 45,000.

(ii) Goodwill of the firm be valued at ₹ 42,000.

(iii) ₹ 26,000 from Naresh’s Capital account be transferred to his loan account and balance be paid through bank; if required, necessary loan may be obtained from Bank.

(iv) New profit sharing ratio of Pankaj and Saurabh is decided to be 5:1.

Give the necessary ledger accounts and balance sheet of the firm after Naresh’s retirement.

 Revaluation Account Dr. Cr. Particulars Amount₹ Particulars Amount₹ Stock 900 Premises 16,000 Provision for Legal Damages 1,200 Provision for Doubtful Debts 100 Profit transferred to Capital: Furniture 4,000 Pankaj 9,000 Naresh 6,000 Saurabh 3,000 18,000 20,100 20,100
 Partners’ Capital Accounts Dr. Cr. Particulars Pankaj Naresh Saurabh Particulars Pankaj Naresh Saurabh Naresh’s Capital A/c 14,000 Balance b/d 46,000 30,000 20,000 Naresh’s Loan A/c 26,000 General Reserve 6,000 4,000 2,000 Bank 28,000 Revaluation (Profit) 9,000 6,000 3,000 Balance c/d 47,000 25,000 Pankaj’s Capital A/c 14,000 61,000 54,000 25,000 61,000 54,000 25,000
 Bank Account Cr. Particulars Amount₹ Particulars Amount₹ Balance b/d 7,600 Naresh’s Capital A/c 28,000 Bank Loan (Balancing Figure) 20,400 28,000 28,000
 Balance Sheet as on March 31, 2017 Liabilities Amount₹ Assets Amount₹ Sundry Creditors 15,000 Debtors 6,000 Bills Payable 12,000 Less: Provision for Doubtful Debts 300 5,700 Bank Loan/overdraft 20,400 Stock 8,100 Outstanding Salaries 2,200 Furniture 45,000 Provision for Legal Damages 7,200 Premises 96,000 Naresh’s Loan 26,000 Capitals: Pankaj 47,000 Saurabh 25,000 72,000 1,54,800 1,54,800

8. Puneet, Pankaj and Pammy are partners in a business sharing profits and losses in the ratio of 2:2:1 respectively. Their balance sheet as on March 31, 2017 was as follows:

 Books of Puneet, Pankaj and Pammy Balance Sheet as on March 31, 2017 Liabilities Amount₹ Assets Amount₹ Sundry Creditors 1,00,000 Cash at Bank 20,000 Capital Accounts: Stock 30,000 Puneet 60,000 Sundry Debtors 80,000 Pankaj 1,00,000 Investments 70,000 Pammy 40,000 2,00,000 Furniture 35,000 Reserve 50,000 Buildings 1,15,000 3,50,000 3,50,000

Mr. Pammy died on September 30, 2017. The partnership deed provided the following:

 (i) The deceased partner will be entitled to his share of profit up to the date of death calculated on the basis of previous year’s profit. (ii) He will be entitled to his share of goodwill of the firm calculated on the basis of 3 years’ purchase of average of last 4 years’ profit. The profits for the last four financial years are given below: for 2013–14; ₹ 80,000; for 2014–15, ₹ 50,000; for 2015–16, ₹ 40,000; for 2016–17, ₹ 30,000.The drawings of the deceased partner up to the date of death amounted to ₹ 10,000. Interest on capital is to be allowed at 12% per annum. Surviving partners agreed that ₹ 15,400 should be paid to the executors immediately and the balance in four equal yearly instalments with interest at 12% p.a. on outstanding balance. Show Mr. Pammy’s Capital account, his Executor’s account till the settlement of the amount due.
 Pammy’s Capital Account Dr. Cr. Particulars Amount₹ Particulars Amount₹ Drawings 10,000 Balance b/d 40,000 Pammy Executor’s A/c 75,400 Profit and Loss (Suspense) 3,000 Puneet’s Capital A/c 15,000 Pankaj’s Capital A/c 15,000 Interest on Capital 2,400 Reserve 10,000 85,400 85,400
 Pammy’s Executor Account Dr. Cr. Date Particulars J.F. Amount₹ Date Particulars J.F. Amount₹ 2017-18 2017-18 Sep. 30 Bank 15,400 Sep. 30 Pammy’s Capital A/c 75,400 Mar. 31 Balance c/d 63,600 Mar. 31 Interest 3,600 79,000 79,000 2018-19 2018-19 Sep. 30 Bank 22,200 April 01 Balance b/d 63,600 (15,000+3,600+3,600) Sep. 30 Interest 3,600 Mar. 31 Balance c/d 47,700 Mar. 31 Interest 2,700 69,900 69,900 2019-20 2019-20 Sep. 30 Bank 20,400 April 01 Balance b/d 47,700 Mar. 31 Balance c/d 31,800 Sep. 30 Interest 2,700 Mar. 31 Interest 1,800 52,200 52,200 2020-21 2020-21 Sep. 30 Bank 18,600 April 01 Balance b/d 31,800 (15,000+1,800+1,800) Sep. 30 Interest 1,800 Mar. 31 Balance c/d 15,900 Mar. 31 Interest 900 34,500 34,500 2021-22 2021-22 Sep. 30 Bank 16,800 April 01 Balance b/d 15,900 (15,000+900+900) Sep. 30 Interest 900 16,800 16,800

Working Notes:

1) Pammy’s Share of Profit

Previous Year’s Profit ´ Proportionate Period ´ Share of Deceased Partner

2) Pammy’s Share of Goodwill

Goodwill of the firm = Average Profit ´ Numbers of Year’s Purchase

Average Profit

Goodwill of the firm = 50,000 ´ 3 = ₹ 1,50,000

3) Gaining Ratio = New Ratio – Old Ratio

Puneet’s Share

Pankaj’s Share

Gaining Ratio between Puneet and Pankaj = 2 : 2 or 1 : 1

4) Interest on Capital for 6 months, i.e. from April 1, 2007 to September 30, 2007

Amount of Capital ´ Rate of Interest ´ Period

5) Interest Amount

The firm closes its books every year on March 31, while instalments to Pammy’s Executor are paid on September 30 every year.

Amount outstanding on 30 September = 75,400 – 15,400 = ₹ 60,000

9. Following is the Balance Sheet of Prateek, Rockey and Kushal as on March 31, 2017.

 Books of Prateek, Rockey and Kushal Balance Sheet as on March 31, 2017 Liabilities Amount₹ Assets Amount₹ Sundry Creditors 16,000 Bills Receivable 16,000 General Reserve 16,000 Furniture 22,600 Capital Accounts: Stock 20,400 Prateek 30,000 Sundry Debtors 22,000 Rockey 20,000 Cash at Bank 18,000 Kushal 20,000 70,000 Cash in Hand 3,000 1,02,000 1,02,000

Rockey died on June 30, 2017. Under the terms of the partnership deed, the executors of a deceased partner were entitled to:

a) Amount standing to the credit of the Partner’s Capital account.

b) Interest on capital at 5% per annum.

c) Share of goodwill on the basis of twice the average of the past three years’ profit and

d) Share of profit from the closing date of the last financial year to the date of death on the basis of last year’s profit.

Profits for the year ending on March 31, 2015, March 31, 2016 and March 31, 2017 were ₹ 12,000, ₹ 16,000 and ₹ 14,000 respectively. Profits were shared in the ratio of capitals.

Pass the necessary journal entries and draw up Rockey’s capital account to be rendered to his executor.

 Books of Prateek and Kushal  Journal Date Particulars L.F. Amount₹ Amount₹ 2017 June 30 Interest on Capital A/c Dr. 250 Profit and Loss (Suspense) A/c Dr. 1,000 General Reserve A/c Dr. 4,571 To Rockey’s Capital A/c 5,821 (Share of profit, interest on capital and share of GeneralReserve credited to Rockey’s Capital Account) June 30 Prateek’s Capital A/c Dr. 4,800 Kushal’s Capital A/c Dr. 3,200 To Rockey’s Capital A/c 8,000 (Rockey’s share of goodwill adjusted to Prateek’s andKushal’s Capital Account in their gaining ratio, 3:2) June 30 Rockey’s Capital A/c Dr. 33,821 To Rockey Executor’s A/c 33,821 (Balance of Rockey’s Capital Account transferred to hisExecutor’s Account)
 Rockey’s Capital Account Dr. Cr. Date Particulars J.F. Amount₹ Date Particulars J.F. Amount₹ 2017 2017 April 1 Rockey’s Executor A/c 33,821 April 1 Balance b/d 20,000 Interest on Capital 250 Profit and Loss (Suspense) A/c 1,000 General Reserve 4,571 Prateek’s Capital 4,800 Kushal’s Capital 3,200 33,821 33,821

Working Notes:

1. Rockey’s Share of Profit = Previous year’s profit × Proportionate Period × Share of Deceased Partner

=

2. Rockey’s Share of Goodwill

Goodwill of a firm = Average profit × Numbers of year’s Purchase

Goodwill of a firm = 14,000 × 2 = ₹ 28,000

3. Gaining Ratio = New Ratio − Old Ratio

Gaining Ratio between Prateek and Kushal = 9:4 or 3:2

4. Interest on Capital for 3 months i.e. from April 1, 2017 to June 30, 2017

Amount of × Rate of Interest × Period

10. Narang, Suri and Bajaj are partners in a firm sharing profits and losses in proportion of 1/2 , 1/6 and 1/3 respectively. The Balance Sheet on April 1, 2015 was as follows:

 Books of Suri, Narang and Bajaj  Balance Sheet as on April 1, 2015 Liabilities Amount₹ Assets Amount₹ Bills Payable 12,000 Freehold Premises 40,000 Sundry Creditors 18,000 Machinery 30,000 Reserves 12,000 Furniture 12,000 Capital Accounts: Stock 22,000 Narang 30,000 Sundry Debtors 20,000 Suri 20,000 Less: Reserve 1,000 19,000 Bajaj 28,000 88,000 for Bad Debt Cash 7,000 1,30,000 1,30,000

Bajaj retires from the business and the partners agree to the following:

a) Freehold premises and stock are to be appreciated by 20% and 15% respectively.

b) Machinery and furniture are to be depreciated by 10% and 7% respectively.

c) Bad Debts reserve is to be increased to ₹ 1,500.

d) Goodwill is valued at ₹ 21,000 on Bajaj’s retirement.

e) The continuing partners have decided to adjust their capitals in their new profit sharing ratio after retirement of Bajaj. Surplus/deficit, if any, in their capital accounts will be adjusted through current accounts.

Prepare necessary ledger accounts and draw the Balance Sheet of the reconstituted firm.

 Revaluation Account Dr. Cr. Particulars Amount₹ Particulars Amount₹ Machinery 3,000 Freehold Properties 8,000 Furniture 840 Stock 3,300 Reserve for Bad debts 500 Capitals: Narang 3,480 Suri 1,160 Bajaj 2,320 6,960 11,300 11,300
 Partners’ Capital Account Dr. Cr. Particulars Narang Suri Bajaj Particulars Narang Suri Bajaj Bajaj’s Capital A/c 5,250 1,750 Balance b/d 30,000 30,000 28,000 Bajaj’s Loan 41,320 Reserves 6,000 2,000 4,000 Revaluation (Profit) 3,480 1,160 2,320 Balance c/d 34,230 31,410 Narang’s Capital A/c 5,250 Suri’s Capital A/c 1,750 39,480 33,160 41,320 39,480 33,160 41,320 Suri’s Current A/c 15,000 Balance b/d 34,230 31,410 Narang’s Current A/c 15,000 Balance c/d 49,230 16,410 49,230 31,410 49,230 31,410
 Balance Sheet as on April 01, 2015 Liabilities Amount₹ Assets Amount₹ Bills Payable 12,000 Free hold Premises 48,000 Sundry Creditors 18,000 Machinery 27,000 Bajaj’s Loan 41,320 Furniture 11,160 Suri’s Current 15,000 Stock 25,300 Capital Account: Sundry Debtors 20,000 Narang 49,230 Less: Reserve for Bad Debt 1,500 18,500 Suri 16,410 65,640 Cash 7,000 Narang’s Current Account 15,000 1,51,960 1,51,960

Working Notes:

1. Bajaj Share in Goodwill = Total Goodwill of the firm ´ Retiring Partner’s Share =

2. Gaining Ratio = New Ratio – Old Ratio

Gaining Ratio between Narang and Suri = 3:1

3. Calculation of New Capitals of the existing partners.

 Balance in Narang’s Capital = 34,230 Balance in Suri’s Capital = 31,410 Total Capital of the New firm after revaluation of assets and liabilities and adjustment of  Goodwill and Reserves = ₹ 65,640

Based on new profit sharing ratio of 3:1

NOTE:

i. In the given Question Suri’s Capital is ₹ 30,000 instead of ₹ 20,000.

ii. Due to insufficient balance in Bajaj’s Capital Account, the amount due to Bajaj is transferred to his Loan Account.

11. The Balance Sheet of Rajesh, Pramod and Nishant who were sharing profits in proportion to their capitals stood as on March 31, 2015:

 Books of Rajesh, Pramod and Nishant  Balance Sheet as on March 31, 2015 Liabilities Amount₹ Assets Amount₹ Bills Payable 6,250 Factory Building 12,000 Sundry Creditors 10,000 Debtors 10,500 Reserve Fund 2,750 Less: Reserve 500 10,000 Capital Accounts: Bills Receivable 7,000 Rajesh 20,000 Stock 15,500 Pramod 15,000 Plant and Machinery 11,500 Nishant 15,000 50,000 Bank Balance 13,000 69,000 69,000

Pramod retired on the date of Balance Sheet and the following adjustments were made:

a) Stock was valued at 10% less than the book value.

b) Factory buildings were appreciated by 12%.

c) Reserve for doubtful debts be created up to 5%.

d) Reserve for legal charges to be made at ₹ 265.

e) The goodwill of the firm be fixed at ₹ 10,000.

f) The capital of the new firm be fixed at ₹ 30,000. The continuing partners decide to keep their capitals in the new profit sharing ratio of 3:2.

Pass journal entries and prepare the balance sheet of the reconstituted firm after transferring the balance in Pramod’s Capital account to his loan account.

 Journal Date Particulars L.F. Amount₹ Amount₹ 2015 Mar. 31 Revaluation A/c Dr. 1,840 To Stock A/c 1,550 To Reserve for Doubtful Debts A/c 25 To Reserve for Legal Charges A/c 265 (Assets and Liabilities are revalued) Mar. 31 Factory Building A/c Dr. 1,440 To Revaluation A/c 1,440 ( Factory Building appreciated) Mar. 31 Rajesh’s Capital A/c Dr. 160 Pramod’s Capital A/c Dr. 120 Nishant’s Capital A/c Dr. 120 To Revaluation A/c 400 (Loss on Revaluation adjusted to Partners’ Capital Account) Mar. 31 Rajesh’s Capital A/c Dr. 2,000 Nishant’s Capital A/c Dr. 1,000 To Pramod Capital’s A/c 3,000 (Pramod’s share of goodwill adjusted to Rajesh’s and Nishant’s Capital Account in their gaining ratio) Mar. 31 Reserve Fund A/c Dr. 2,750 To Rajesh’s Capital A/c 1,100 To Pramod’s Capital A/c 825 To Nishant’s Capital A/c 825 (Reserve Fund distributed all the partners) Mar. 31 Pramod’s Capital A/c Dr. 18,705 To Pramod’s Loan A/c 18,705 (Pramod’s Capital transferred to his Loan Account) Mar. 31 Rajesh’s Capital A/c Dr. 940 Nishant’s Capital A/c Dr. 2,705 To Rajesh’s Current A/c 940 To Nishant’s Current A/c 2,705 (Excess in Capital Account is transferred to Current Account)
 Parters’ Capital Account Dr. Cr. Particulars Rajesh Pramod Nishant Particulars Rajesh Pramod Nishant Revaluation (Loss) 160 120 120 Balance b/d 20,000 15,000 15,000 Pramod’s Capital A/c 2,000 1,000 Reserve Fund 1,100 825 825 Pramod’s Loan A/c 18,705 Rajesh’s Capital A/c 2,000 Rajesh’s Current A/c 940 Nishant’s Capital A/c 1,000 Nishant’s Current A/c 2,705 Balance c/d 18,000 12,000 21,100 18,825 15,825 21,100 18,825 15,825
 Balance Sheet as on March 31, 2015 Liabilities Amount₹ Assets Amount₹ Bills Payable 6,250 Plant and Machinery 11,500 Sundry Creditors 10,000 Debtors 10,500 Reserve for Legal Charges 265 Less: Reserve (525) 9,975 Pramod’s Loan 18,705 Bills Receivable 7,000 Current Account: Stock 15,500 Rajesh 940 Less: 10% Depreciation (1,550) 13,950 Nishant 2,705 3,645 Capital Account: Factory Building 12,000 13,440 Rajesh 18,000 Add: 12% Appreciation 1,440 Nishant 12,000 30,000 Bank Balance 13,000 68,865 68,865

Working Notes:

1) Pramod’s share of goodwill = Total goodwill of the firm × Retiring Partner’s Share =

2) Gaining Ratio = New Ratio − Old Ratio

Gaining Ratio between Rajesh and Nishant = 2:1

NOTE: In the above solution, in order to adjust the capital of remaining partners in the new firm according to their new profit sharing ratio, the surplus or the deficit of Capital Account is transferred to their Current Account. But, in order to match the answer with that of given in the book, the surplus or the deficit amount of the Partners’ Capital Account, will either be withdrawn or brought in by the old partners. This treatment will be shown in the Partners’ Capital itself and no need to transfer the surplus or deficit capital balance to their Current Accounts. The following Journal entry is passed to record the withdrawal of surplus capital by the partners.

If existing partners withdraw their excess capital

Journal entry

 Rajesh’s Capital A/c Dr. 940 Nishant’s Capital A/c Dr. 2,705 To Bank A/c 3,645 (Surplus Capital withdrawn)
 Balance Sheet as on March 31, 2015 Liabilities Amount₹ Assets Amount₹ Bills Payable 6,250 Plant and Machinery 11,500 Sundry Creditors 10,000 Debtors 10,500 Reserve for Legal Charges 265 Less: Reserve (525) 9,975 Pramod’s Loan 18,705 Bills Receivable 7,000 Capital: Stock 15,500 Rajesh 18,000 Less: 10% Depreciation (1,550) 13,950 Nishant 12,000 30,000 Factory Building 12,000 Add: 12% Appreciation 1,440 13,440 Bank Balance 9,355 65,220 65,220

12. Following is the Balance Sheet of Jain, Gupta and Malik as on March 31, 2016.

 Books of Jain, Gupta and MalikBalance Sheet as on March 31, 2016 Liabilities Amount₹ Assets Amount₹ Sundry Creditors 19,800 Land and Building 26,000 Telephone Bills Outstanding 300 Bonds 14,370 Accounts Payable 8,950 Cash 5,500 Accumulated Profits 16,750 Bills Receivable 23,450 Sundry Debtors 26,700 Capitals : Stock 18,100 Jain 40,000 Office Furniture 18,250 Gupta 60,000 Plants and Machinery 20,230 Malik 20,000 1,20,000 Computers 13,200 1,65,800 1,65,800

The partners have been sharing profits in the ratio of 5:3:2. Malik decides to retire from business on April 1, 2016 and his share in the business is to be calculated as per the following terms of revaluation of liabilities and assets : Stock, ₹ 20,000; Office furniture, ₹ 14,250; Plant and Machinery ₹ 23,530; Land and Building ₹ 20,000.

A provision of ₹ 1,700 to be created for doubtful debts. The goodwill of the firm is valued at ₹ 9,000.

The continuing partners agreed to pay ₹ 16,500 as cash on retirement of Malik, to be contributed by continuing partners in the ratio of 3:2. The balance in the capital account of Malik will be treated as loan.

Prepare Revaluation account, capital accounts, and Balance Sheet of the reconstituted firm.

 In the books of Jain and GuptaRevaluation Account Dr. Cr. Particulars Amount₹ Particulars Amount₹ Office Furniture 4,000 Stock 1,900 Land and Building 6,000 Plant and Machinery 3,300 Provision for Doubtful Debts 1,700 Loss transferred to Jain’s Capital A/c 3,250 Gupta’s Capital A/c 1,950 Malik’s Capital A/c 1,300 6,500 11,700 11,700

 Partners’ Capital Account Dr. Cr. Particulars Jain Gupta Malik Particulars Jain Gupta Malik Revaluation (Loss) 3,250 1,950 1,300 Balance b/d 40,000 60,000 20,000 Malik’s Capital 1,125 675 Accumulated Profits 8,375 5,025 3,350 Cash 16,500 Jain’s Capital A/c 1,125 Malik’s Loan 7,350 Gupta’s Capital A/c 675 Balance c/d 53,900 69,000 Cash 9,900 6,600 58,275 71,625 25,150 58,275 71,625 25,150
 Balance Sheet Liabilities Amount₹ Assets Amount₹ Sundry Creditors 19,800 Stock (18,100 + 1,900) 20,000 Telephone Bills Outstanding 300 Bonds 14,370 Accounts Payable 8,950 Cash 5,500 Malik’s Loan 7,350 Bills Receivable 23,450 Sundry Debtors 26,700 Partners’ Capital: Less: Provision for Bad Debts 1,700 25,000 Jain 53,900 Land and Building (26,000 – 6,000) 20,000 Gupta 69,000 1,22,900 Office Furniture (18,250 – 4,000) 14,250 Plant and Machinery (20,230 + 3,300) 23,530 Computers 13,200 1,59,300 1,59,300

Working Note:

1) Malik’s share of goodwill = Total Goodwill × Retiring Partner Share =

2) Gaining Ratio = New Ratio – Old Ratio

Gaining Ratio between Jain and Gupta = 10:6 or 5:3

13. Arti, Bharti and Seema are partners sharing profits in the proportion of 3:2:1 and their Balance Sheet as on March 31, 2016 stood as follows:

 Books of Arti, Bharti and Seema  Balance Sheet as on March 31, 2016 Liabilities Amount₹ Assets Amount₹ Bills Payable 12,000 Buildings 21,000 Creditors 14,000 Cash in Hand 12,000 General Reserve 12,000 Bank 13,700 Capitals: Debtors 12,000 Arti 20,000 Bills Receivable 4,300 Bharti 12,000 Stock 1,750 Seema 8,000 40,000 Investment 13,250 78,000 78,000

Bharti died on June 12, 2016 and according to the deed of the said partnership, her executors are entitled to be paid as under:

(a) The capital to her credit at the time of her death and interest thereon @ 10% per annum.

(b) Her proportionate share of reserve fund.

(c) Her share of profits for the intervening period will be based on the sales during that period, which were calculated as ₹ 1, 00,000. The rate of profit during past three years had been 10% on sales.

(d) Goodwill according to her share of profit to be calculated by taking twice the amount of the average profit of the last three years less 20%. The profits of the previous years were:

2013 – ₹ 8,200

2014 – ₹ 9,000

2015 – ₹ 9,800

The investments were sold for ₹ 16,200 and her executors were paid out. Pass the necessary journal entries and write the account of the executors of Bharti.

 Books of Arti and Seema  Journal Date Particulars L.F. Amount₹ Amount₹ 2016 June 12 Interest on Capital A/c Dr. 240 General Reserve A/c Dr. 4,000 Profit and Loss (Suspense) A/c Dr. 3,333 To Bharti’s Capital A/c 7,573 (Profit, interest and general reserve are in credited toBharti’s Capital account) June 12 Arti’s Capital A/c Dr. 3,600 Seema’s Capital A/c Dr. 1,200 To Bharti’s Capital A/c 4,800 (Bharti’s share of goodwill adjusted to Arti’s andSeema’s Capital Account in their gaining ratio, 3:1) June 12 Bharti’s Capital A/c Dr. 24,373 To Bharti’s Executor’s A/c 24,373 (Bharti’s capital account is transferred to her executor’saccount) June 12 Bank A/c Dr. 16,200 To Investment A/c 13,250 To Profit on Sale of Investment 2,950 (Investment sold) June 12 Bharti’s Executor A/c Dr. 24,373 To Bank A/c 24,373 (Bharti Executor paid)
 Bharti’s Capital Account Dr. Cr. Date Particulars J.F. Amount₹ Date Particulars J.F. Amount₹ 2016 2016 June 12 Bharti’s Executor’s A/c 24,373 Mar. 31 Balance b/d 12,000 June 12 Interest on Capital 240 Profit and Loss (Suspense) 3,333 General Reserve 4,000 Arti’s Capital A/c 3,600 Seema’s Capital A/c 1,200 24,373 24,373
 Bharti’s Executor’s Account Dr. Cr. Date Particulars J.F. Amount₹ Date Particulars J.F. Amount₹ 2016 2016 June 12 Bank 24,373 June 12 Bharti’s Capital A/c 24,373 24,373 24,373

Working Notes:

1. Bharti’s share of profit = Profit is 10% of sales

Sales during the last year for that period were ₹ 1, 00,000

If sales are ₹ 1, 00,000, then the profit is ₹ 10,000

2. Bharti’s Share of Goodwill

Goodwill of the firm = Average Profit × Number of Years Purchase

Or, 9,000 − 20% of 9,000 = 9,000 − 1,800 = ₹ 7,200

Goodwill of the firm = 7,200 × 2 = ₹ 14,400

3. Gaining Ratio = New Ratio − Old Ratio

Gaining ratio between Arti and Seema = 3:1

4. Interest on Capital for 73 days, i.e. from April 1, 2016 to June 12, 2016

Interest on capital = Amount of Capital × Ratio of Interest × Period

14. Nithya, Sathya and Mithya were partners sharing profits and losses in the ratio of 5:3:2. Their Balance Sheet as on March 31, 2015 was as follows:

 Books of Nithya, Sathya and MithyaBalance Sheet at March 31, 2015 Liabilities Amount₹ Assets Amount₹ Creditors 14,000 Investments 10,000 Reserve Fund 6,000 Goodwill 5,000 Capitals: Premises 20,000 Nithya 30,000 Patents 6,000 Sathya 30,000 Machinery 30,000 Mithya 20,000 80,000 Stock 13,000 Debtors 8,000 Bank 8,000 1,00,000 1,00,000

Mithya dies on August 1, 2015. The agreement between the executors of Mithya and the partners stated that:

(a) Goodwill of the firm be valued at  times the average profits of last four years. The profits of four years were : in 2011-12, ₹ 13,000; in 2012-13, ₹ 12,000; in 2013-14, ₹ 16,000; and in 2014-15, ₹ 15,000.

(b) The patents are to be valued at ₹ 8,000, Machinery at ₹ 25,000 and Premises at ₹ 25,000.

(c) The share of profit of Mithya should be calculated on the basis of the profit of 2014-15.

(d) ₹ 4,200 should be paid immediately and the balance should be paid in 4 equal half-yearly instalments carrying interest @ 10%.

Record the necessary journal entries to give effect to the above and write the executor’s account till the amount is fully paid. Also prepare the Balance Sheet of Nithya and Sathya as it would appear on August 1, 2015 after giving effect to the adjustments.

 Books of Nithya and SathyaJournal Date Particulars L.F. Amount₹ Amount₹ 2015 Aug. 1 Nithya’s Capital A/c Dr. 2,500 Sathya’s Capital A/c Dr. 1,500 Mithya’s Capital A/c Dr. 1,000 To Goodwill A/c 5,000 (Goodwill written off among all the partners) Aug. 1 Patents A/c Dr. 2,000 Premises A/c Dr. 5,000 To Revaluation A/c 7,000 (Increase in the value of patents and premises) Aug. 1 Revaluation A/c Dr. 5,000 To Machinery A/c 5,000 (Decrease in the value of machinery) Aug. 1 Revaluation A/c Dr. 2,000 To Nithya’s Capital A/c 1,000 To Sathya’s Capital A/c 600 To Mithya’s Capital A/c 400 (Profit on revaluation of liabilities and assets transferredto Partners’ Capital Account) Aug. 1 Reserve Fund A/c Dr. 6,000 To Nithya’s Capital A/c 3,000 To Sathya’s Capital A/c 1,800 To Mithya’s Capital A/c 1,200 (Reserve Fund transferred to Partners’ Capital Account) Aug. 1 Nithya’s Capital A/c Dr. 4,375 Sathya’s Capital A/c Dr. 2,625 To Mithya’s Capital A/c 7,000 (Mithya’s share of goodwill adjusted to Nithya’s andSathya’s Capital Account in their gaining ratio, 5:3) Aug. 1 Profit and Loss A/c (Suspense) Dr. 1,000 To Mithya’s Capital A/c 1,000 (Profit till date of death credited to Mithya’s CapitalAccount) Aug. 1 Mithya’s Capital A/c Dr. 28,600 To Mithya Executors A/c 28,600 (Mithya’s Capital Account transferred to her executoraccount) Aug. 1 Mithya Executor’s A/c Dr. 4,200 To Cash A/c 4,200 (Cash paid to Mithya’s executor)
 Mithya Executor’s Account Dr. Cr. Date Particulars J.F. Amount₹ Date Particulars J.F. Amount₹ 2015 2015 Aug. 12016 Bank 4,200 Aug. 12016 Mithya’s Capital A/c 28,600 Jan. 31 Bank (6,100 + 1220) 7,320 Jan. 31 Interest (24,400×10100×612)(24,400×10100×612) 1,220 Mar. 31 Balance c/d 18,605 Mar. 31 Interest (18,300×10100×212)(18,300×10100×212) 305 30,125 30,125 2016 2016 July 312017 Bank (6,100 + 305 + 610) 7,015 April 01July 31 2017 Balance b/dInterest (18,300×10100×412)(18,300×10100×412) 18,605610 Jan. 31 Bank (6,100 + 610) 6,710 Jan. 31 Interest (12,200×10100×612)(12,200×10100×612) 610 Mar. 31 Balance c/d 6202 Mar. 31 Interest (6,100×10100×212)(6,100×10100×212) 102 19,927 19,927 2017 2017 July 31 Bank (6,100 + 102 + 203) 6,405 April 01 Balance b/d 6,202 July 31 Interest (6,100×10100×412)(6,100×10100×412) 203 6,405 6,405
 Balance SheetAs on August 31, 2015 Liabilities Amount₹ Assets Amount₹ Creditors 14,000 Investments 10,000 Mithya’s Executor’s Loan A/c 24,400 Premises 25,000 Partners’ Capital A/c Machinery 25,000 Nithya 27,125 Stock 13,000 Sathya 28,275 55,400 Debtors 8,000 Patents 8,000 Bank (8,000 – 4,200) 3,800 Profit and Loss (Suspense) 1,000 93,800 93,800

Working Notes:

1.

 Partners’ Capital Accounts Dr. Cr. Particulars Nithya Sathya Mithya Particulars Nithya Sathya Mithya Goodwill 2,500 1,500 1,000 Balance b/d 30,000 30,000 20,000 Mithya’s Capital A/c 4,375 2,625 Revaluation A/c 1,000 600 400 Mithya’s Executor’s A/c 28,600 Reserve Fund 3,000 1,800 1,200 Balance c/d 27,125 28,275 Profit and Loss A/c (Suspense) 1,000 Nithya’s Capital A/c 4,375 Sathya’s Capital A/c 2,625 34,000 32,400 29,600 34,000 32,400 29,600

2. Mithya’s Share of Profit:

Previous year’s profit × Proportionate Period × Share of Profit

3. Mithya’s share of Goodwill

Goodwill of a firm = Average Profit × Number of Year’s Purchase

4. Gaining Ratio = New Ratio – Old Ratio

Gaining Ratio between Nithya and Sathya = 5:3

### Concepts covered in this chapter –

• Ascertaining the amount due to retiring or deceased partner
• New profit sharing ratio
• Gaining ratio
• Treatment of Goodwill
• Adjustment of the partner’s capital
• Death of a partner