Retirement and Death( Revision)

Part A - 2 Marks
1. Suresh, Ramesh and Tushar were partners of a firm sharing profits in the ratio of 6:5:4. Ramesh retired and his capital after
making adjustments on account of reserves, revaluation of assets and reassessment of liabilities stood at ₹ 2,50,400. Suresh
and Tushar agreed to pay him ₹ 2,90,000 in full settlement of his claim.
Pass necessary journal entry for the treatment of goodwill. Show working clearly.
2. R, S & T are partners in a firm sharing profit & loss in the ratio of 2 : 2 : 1. T Retires and his balance in capital a/c after
adjustment for reserve & revaluation of assets & liabilities comes out to be Rs. 50000. R & S agreed to pay him Rs. 60000.
Give journal entry for the adjustment of goodwill.
3. L, M, N and O are partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1 : 1. M and O decided to retire from the
firm. The goodwill of the firm was valued at ₹ 3,60,000. L and N decided to share future profits equally. Find out Gaining
Ratio and Pass necessary journal entry for the treatment of goodwill.
4. A, B and C are partners with capitals of ₹ 1,00,000; ₹ 75,000 and ₹ 50,000 respectively. On C's retirement, his share is
acquired by A and B in the ratio of 6 : 4. Calculate gaining ratio and the new profit-sharing ratio.
5. M, N, & P are partners in a firm. P retires & the goodwill of the firm is valued at Rs30000. M & N decide to share future
profits in the ratio 3:2. Pass necessary adjustment entries for the following:-
a. If goodwill A/c already appears in books at Rs18000.
b. When no goodwill A/c appears in the books.
6. A, B, C and D are partners sharing profits in the ratio of 2 : 4 : 3 : 1. C retires and for this purpose, goodwill is valued at two
year’s purchase of average super-profits of last four years, which are as under:
I Year ₹ 40,000
II Year ₹ 10,000 (Loss)
III Year ₹ 1,00,000
IV Year ₹ 1,50,000
The normal profits for similar firms are ₹ 56,000.
Record necessary entry for goodwill on the retirement of C.
7. Ram, Laxman and Bharat are partners sharing profits in the ratio of 3 :2 :1. Goodwill is appearing in the books at a value of ₹
1,80,000. Laxman retires and at the time of his retirement, goodwill is valued at ₹ 2,52,000. Ram and Bharat decided to share
future profits in the ratio of 2 :1.The Profit for the first year after Laxman's retirement amount to ₹ 1,20,000. Give the
necessary Journal entries to record goodwill and to distribute the profit. Show your calculations clearly.
8. Asha, Naveen and Shalini were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Goodwill appeared in their books at a
value of ₹ 80,000 and General Reserve at ₹ 40,000. Naveen decided to retire from the firm. On the date of his retirement,
goodwill of the firm was valued at ₹ 1,20,000. The new profit-sharing ratio decided among Asha and Shalini is 2 : 3.
Record necessary Journal entries on Naveen's retirement.
9. A, B and C are partners sharing profits in the ratio of 4 : 3 : 2. decides to retire and surrenders his share to A and C in the ratio
of 3 : 1. The goodwill of the firm is valued at 1.5 years purchase of super-profits based on average profits of the last three
years which were ₹ 2,00,000, ₹ 2,40,000 and ₹ 3,10,000 respectively. The normal profits for a similar firm are ₹ 1,70,000.
Goodwill already appears in the books of the firm at ₹ 72,000. The profit for the first year after retirement was ₹ 5,40,000.
Give the necessary journal entries to adjust goodwill and to distribute profits.
10. Virat, Rohit and Shikhar were partners sharing profits in the ratio of 3 : 2 :1. Shikhar retired from the firm on 1st April, 2019
on which date goodwill of the firm was valued at ₹ 2,40,000. Virat and Rohit decided to share future profits equally from that
date. Pass the necessary Journal entries giving effect to goodwill on Shikhar's retirement raising Goodwill at its current value.
11. A, B and C are partners in a firm sharing profits in the ratio of 2 : 3 : 4. On 31st March 2019, A retires and B and C decided to
share future profits in the ratio of 2:1. Following balances appeared in their books on this date:
₹
Profit and Loss (Dr.) 72,000
Employee's Provident Fund 1,50,000

Sukhvinder Singh
Certified Financial Planner,
Ca Finalist, M.com, B.ed
 Workmen Compensation Reserve 45,000
General Reserve 1,20,000
It is agreed that (i) workmen Compensation Reserve is no more required, and (ii) 25% of the General Reserve is to be
transferred to Investment Fluctuation Reserve. Pass Journal entries for the adjustment of these items on A's retirement.
12. A, B, C and D are partners sharing profits in the ratio of 1 : 2 : 3 : 4. D retires and his share is taken up by A and B equally.
Goodwill was valued at 3 year’s purchase of average profits which were ₹ 20,000. General Reserve showed a balance of ₹
65,000 at the time of D’s retirement.
You are required to record necessary journal entries to record the above adjustments on D’s retirement. Also calculate the new
profit-sharing ratios.
13. A, B, C and D are partners sharing profits in the ratio of 3 : 3 : 2 : 2 respectively. D retires and A, B and C decide to share the
future profits in the ratio of 3 : 2 : 1. Goodwill of the firm is valued at Rs 6,00,000. Goodwill already appears in the books at
Rs 4,50,000. The profit for the 1st year after D’s retirement amount to Rs 12,00,000.
Give the necessary journal entries to record goodwill and to distribute the profits. Show your calculations clearly.
Part B - 3 Marks
14. Harihar, Hemang and Harit were partners with fixed capitals of ₹ 3,00,000, ₹ 2,00,000 & ₹ 1,00,000 respectively. They shared
profits in the ratio of their fixed capitals. Harit died on 31st May, 2020, whereas the firm closes its books of accounts on 31st
March every year. According to their partnership deed, Harit’s representatives would be entitled to get share in the interim
profits of the firm on the basis of sales. Sales and profit for the year 2019-20 amounted to ₹ 8,00,000 and ₹ 2,40,000
respectively and sales from 1st April, 2020 to 31st May 2020 amounted to ₹ 1,50,000. The rate of profit to sales remained
constant during these two years. You are required to:
a. Calculate Harit’s share in profit.
b. Pass journal entry to record Harit’s share in profit.
15. X, Y and Z were partners in firm sharing profits in the ratio of 2 : 2 : 1. Y died on 30th June, 2018. Partnership Deed provided
for the following on the death of a partner:
a. Goodwill of the business was to be calculated on the basis of 2 times the average profit of the past 5 years. Profits
for the years ended 31st March, 2018, 31st March, 2017, 31st March, 2016, 31st March, 2015 and 31st March,
2014 were ₹ 3,20,000 (Loss); ₹ 1,00,000; ₹ 1,60,000; ₹ 2,20,000 and ₹ 4,40,000 respectively.
b. Y's share of profit or loss from 1st April, 2018 till his death was to be calculated on the basis of the profit or loss
for the year ended 31st March, 2018.
You are required to calculate the following:
i. Goodwill of the firm and Y's share of goodwill at the time of his death.
ii. Y's share in the profit or loss of the firm till the date of his death.
16. A, B, C and D are partners sharing profits in the ratio of 3 : 3 : 2 : 2 respectively. D retires and A, B and C decide to share the
future profits in the ratio of 3 : 2 : 1. Goodwill of the firm is valued at Rs 6,00,000. Goodwill already appears in the books at
Rs 4,50,000. The profit for the 1st year after D’s retirement amount to Rs 12,00,000.
Give the necessary journal entries to record goodwill and to distribute the profits. Show your calculations clearly.
17. Ram, Manohar and Joshi were partners in a firm. Joshi died on 28th February, 2019. 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 years of profits
before death. Profits for the years ended 31st March, 2016, 2017 and 2018 were ₹ 80,000, ₹ 90,000 and ₹ 1,00,000
respectively. Calculate Joshi's share of profit till his death and pass Journal entry for the same when:
a. there is no change in profit-sharing ratio of remaining partners, and
b. there is a change in the profit-sharing ratio of remaining partners, the new ratio being 3 : 2.
18. Monika, Sonika and Manisha were partners in a firm sharing profits in the ratio of 2 : 2 : 1 respectively.Sonika died on 30th
June, 2013. It was agreed between her executors and the remaining partners that
i. Goodwill of the firm is valued at 3 years’ purchase of average profits for the last four years. The average profits
were Rs 2,00,000.
ii. Her share in the profits upto the date of death will be calculated on the basis of average profits for the last 4 years.

Sukhvinder Singh
Certified Financial Planner,
Ca Finalist, M.com, B.ed
 Record necessary Journal entries on Sonika's retirement.
19. Meera, Sarthak and Rohit were partners sharing profits in the ratio of 2 : 2 : 1.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.
a. His share of goodwill will be calculated on the basis of thrice the average of the past 4 years’ profits.
b. 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.
You are required to calculate the following:
a. Goodwill of the firm and Sarthak's share of goodwill at the time of his death.
b. Sarthak's share in the profit or loss of the firm till the date of his death.
20. 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 Rs.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.
a. Calculate Harit’s share in profit.
b. Pass journal entry to record Harit’s share in profit.
21. Manav, Nath and Narayan were partners in a firm sharing profits in the ratio of 1 : 2 : 1. The firm closes its books on 31st
March every year. On 30th September, 2015, Nath died. On that date, his capital account showed a debit balance of Rs 5,000.
There was a debit balance of Rs 30,000 in the profit and loss account. The goodwill of the firm was valued at Rs 3,80,000.
Nath’s share of profit in the year of his death was to be calculated on the basis of average profit of the last 5 years, which was
Rs 90,000. Pass necessary journal entries in the books of the firm on Nath’s death.
Part C - 5 Marks
22. Gini, Bini and Mini were in partnership sharing profits and losses in the ratio of 5:2:2. Their Balance Sheet as at 31st March,
2021 was as follows:
Balance Sheet as at 31st March,2021
Liabilities Amount (₹) Assets Amount (₹)

Sundry Creditors 56,500 Cash 1,17,300

Bank Overdraft 61,500 Debtors 38,000
Workmen’s Compensation 32,000 Less: Provision For (2,300) 35,700
Reserve Doubtful Debts
Capitals: Inventories 1,34,000
Gini 4,60,000 Machinery 1,00,000
Bini 3,00,000 Furniture 1,80,000
Mini 2,90,000 Building 5,70,000
Goodwill 63,000
12,00,000 12,00,000
On 31st March, 2021, Gini retired from the firm. All the partners agreed to revalue the assets and liabilities on the
following basis:
a. Bad debts amounted to ₹ 5,000. A provision for doubtful debts was to be maintained at 10% on debtors.
b. Partners have decided to write off existing goodwill.
c. Goodwill of the firm was valued at ₹ 54,000 and be adjusted into the Capital Accounts of Bini and Mini, who will
share profits in future in the ratio of 5:4.
d. The assets and liabilities valued as: Inventories ₹ 1,30,000; Machinery ₹ 82,000; Furniture ₹ 1,95,000 and
Building ₹ 6,00,000.
e. Liability of ₹ 23,000 is to be created on account of Claim for Workmen Compensation.

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Certified Financial Planner,
Ca Finalist, M.com, B.ed
 f. There was an unrecorded investment in shares of ₹ 25,000. It was decided to pay off Gini by giving her
unrecorded investment in full settlement of her part payment of ₹ 28,000 and remaining amount after two months.
Prepare Revaluation Account and Partners’ Capital Accounts as on 31st March, 2021.
23. R, S and T were partners sharing profits and losses in the ratio of 5 :3 :2 respectively. On 31 st March, 2018, their Balance
Sheet stood as:
Liabilities ₹ Assets ₹
Sundry Creditors 40,000 Goodwill 25,000
BIlls Payable 15,000 Leasehold 1,00,000
Workmen Compensation Reserve 30,000 Patents 30,000
Capital A/cs: Machinery 1,50,000
R 1,50,000 Stock 50,000
S 1,25,000 Debitors 40,000
T 75,000 3,50,000 Cash at Bank 40,000
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 1 st
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.
Pass necessary Journal entries to record the above transactions.
24. A, B and C were partners, sharing profits and losses in the ratio of 2:2:1. B decides to retire on 31st March, 2019. On the date
of his retirement, some of the assets and liabilities appeared in the books as follows:
Creditors ₹ 70,000; Building ₹ 1,00,000; Plant and Machinery ₹ 40,000; Stock of Raw Materials ₹ 20,000; Stock of Finished
Goods ₹ 30,000 and Debtors ₹ 20,000.
Following was agreed among the partners on B's retirement:
i. Building to be appreciated by 20%.
ii. Plant and Machinery to be reduced by 10%.
iii. A Provision of 5% on Debtors to be created for Doubtful Debts.
iv. Stock of Raw Materials to be valued at ₹ 18,000 and Finished Goods at ₹ 35,000.
v. An Old Computer previously written off was sold for ₹ 2,000 as scrap.
vi. Firm had to pay ₹ 5,000 to an injured employee.
Pass necessary Journal entries to record the above adjustments and prepare the Revaluation Account.
25. A, B and C are partners in a business, sharing profits and losses in the ratio of 3 : 2 : 1. Their Balance Sheet as at 31st March,
2019 was:
Liabilities ₹ Assets ₹
Sundry Creditors 16,000 Cash in Hand 6,000
General Reserve 60,000 Cash at Bank 10,000
Capital A/cs: Sundry Debtors 90,000
A 1,00,000 Stock in Hand 70,000
B 1,00,000 Machinery 60,000
C 1,00,000 3,00,000 Building 1,40,000
3,76,000 3,76,000

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Certified Financial Planner,
Ca Finalist, M.com, B.ed
 C retires from business on 1st April, 2019. It was agreed that the amount due to him will be paid on 30th June, 2020. It
was also agreed to adjust the value of assets as follows:
i. Provide for doubtful debts @ 5% on Sundry Debtors.
ii. Reduce Stock by 5% and Machinery by 10%.
iii. Building to be revalued at ₹ 1,51,000.
iv. Goodwill of the firm is valued at ₹ 1,50,000.
v. A and B will continue to carry on the business and shall share profits and losses equally in the future.
Prepare Revaluation Account (Profit and Loss Adjustment Account), Partners' Capital Accounts, C's Loan Account and
Balance Sheet of the firm as at 1st April, 2019
26. Following is the Balance Sheet of Punita, Rashi and Seema who are sharing profits in the ratio 2 : 1 : 2 as on 31st March,
2013.
Liabilities ₹ Assets ₹
Creditors 38,000 Building 2,40,000
Bills Payable 2,000 Stock 65,000
Capitals: Debtors 30,000
Punita 1,44,000 Cash at Bank 5,000
Rashi 92,000 Profit and Loss Account 60,000
Seema 1,24,000 3,60,000
4,00,000 4,00,000
Punita died on 30th September 2013. She had withdrawn ₹ 44,000 from her capital on July 1, 2013. According to the
partnership agreement, she was entitled to interest on capital @ 8% p.a. Her share of profit till the date of death was to be
calculated on the basis of the average profits of the last three years. Goodwill was to be calculated on the basis of three
times the average profits of the last four years. The profits for the years ended 2009-10, 2010-11 and 2011-12 were ₹
30,000, ₹ 70,000 and ₹ 80,000 respectively. Prepare Punita’s account to be rendered to her executors.
27. On 31st March, 2015, the Balance Sheet of Punit, Rahul and Seema was as follows:
Liabilities Amount (₹) Assets Amount (₹)
Capital: Punit 60,000 Building 40,000
Rahul 50,000 Machinery 60,000
Seema 30,000 1,40,000 Patents 12,000
Reserves 20,000 Stock 20,000
Creditors 14,000 Cash 42,000
1,74,000 1,74,000
They were sharing profit and loss in the ratio 5 : 3 : 2. Seema died on 1st October, 2015. It was agreed between her
executors and the remaining partners that:
i. Goodwill will be valued at 2 years’ purchase of the average profit of the previous five years, which were:
2010-11: ₹ 30,000; 2011-12: ₹ 26,000; 2012-13: ₹ 24.000: 2013-14: ₹ 30,000 and 2014-15: ₹ 40.000.
ii. Patents are valued at ₹ 16,000; Machinery at ₹ 56,000; Buildings at ₹ 60,000.
iii. Profit for the year 2015-16 be taken as having been accrued at the same rate as that in the previous year.
iv. Interest on capital will be provided at 10% per annum.
v. A sum of ₹ 15,500 was paid to her executors immediately.
Prepare Revaluation Account, Seema’s Capital Account
28. Following is the Balance Sheet of Prateek, Rocky and Kushal as on March 31, 2017.
Books of Prateek, Rockey, and Kushal
Balance Sheet as on March 31, 2017
Liabilities Amount Rs Assets Amount Rs
Sundry Creditors 16,000 Bills Receivable 16,000

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Certified Financial Planner,
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 General Reserve 16,000 Furniture 22,600
Capital Accounts: Stock 20,400
Prateek 30,000 Sundry Debtors 22,000
Rocky 20,000 Cash at Bank 18,000
Kushal 20,000 70,000 Cash in Hand 3,000
1,02,000 1,02,000
Rocky died on June 30, 2017. Under the terms of the partnership deed, the executors of a deceased partner were entitled
to:
i. Amount standing to the credit of the Partner’s Capital account.
ii. Interest on capital at 5% per annum.
iii. Share of goodwill on the basis of twice the average of the past three years’ profit and
iv. 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 Rs 12,000, Rs 16,000 and Rs
14,000 respectively. Profits were shared in the ratio of capitals.
Pass the necessary journal entries.
29. A, B and C are partners sharing profits and losses in the ratio of 4 : 3 : 3. Their Balance Sheet as at 31st March, 2019 is:
Liabilities ₹ Assets ₹
Creditors 7,000 Land and Building 36,000
Bills Payable 3,000 Plant and machinery 28,000
Reserves 20,000 Computer Printer 8,000
Capital A/cs: Stock 20,000
A 32,000 Sundry Debtors 14,000
B 24,000 Less: Provision for Doubtful Debts 2,000 12,000
C 20,000 76,000 Bank 2,000
1,06,000 1,06,000
On 1 st April, 2019, B retired from the firm on the following terms:
i. Goodwill of the firm is to be valued at ₹ 14,000.
ii. Stock, Land and Building are to be appreciated by 10%.
iii. Plant and Machinery and Computer Printer are to be reduced by 10%.
iv. Sundry Debtors are considered to be good.
v. There is a liability of ₹ 2,000 for the payment of outstanding salary to the employees of the firm. This liability was
not provided in the Balance Sheet but the same is to be recorded now.
vi. Amount payable to B is to be transferred to his Loan Account.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of A and C after B's retirement.
30. Following is the Balance Sheet of Jain, Gupta and Malik as on March 31, 2016:
Books of Jain, Gupta and Malik
Balance 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
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Certified Financial Planner,
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 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 assets and liabilities: 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.

Sukhvinder Singh
Certified Financial Planner,
Ca Finalist, M.com, B.ed