INDEX

S.NO CHAPTER NAME PAGE NO.

1. ACCOUNTING FOR PARTNERSHIP FIRM: FUNDAMENTALS 02-22

2. ACCOUNTING FOR PARTNERSHIP FIRM: GOODWILL 23-34

3. CHANGE IN PROFIT SHARING RATIO 35-49

4. ADMISSION OF A PARTNER 50-106

5. RETIREMENT OF A PARTNER 107-149

6. DEATH OF A PARTNER 150-179

7. DISSOLUTION OF A PARTNERSHIP FIRM 180-226

8. ISSUE OF SHARES 227-261

9. ISSUE OF DEBENTURES 262-277

 FUNDAMENTALS OF PARTNERSHIP:
Q 1 On 1st April, 2021 A and B commenced business with Capitals of ₹6,00,000 and ₹2,00,000
respectively. On 31st March, 2022 the net profit (before taking into account the provisions of
deed) was ₹2,40,000. Interest on capitals is to be allowed at 6% p.a. B was entitled to a salary
of ₹60,000 p.a. The drawings of the partners A and B were ₹60,000 and ₹40,000 respectively.
The interest on Drawings for A being ₹2,000 and B ₹ 1,000. Assuming that A and B are equal
partners, prepare the Profit & Loss Appropriation A/c and Partner’s Capital Accounts as at
31st March, 2022.
[Ans. Divisible Profits ₹ 1,35,000; Capitals A ₹6,41,500 and B ₹2,98,500.]
Note : In the absence of information, Capitals will be treated fluctuating.
Q. 2. Anubha and Kajal entered into partnership sharing profits and losses in the ratio of 2 : 1.
Their capitals were ₹90,000 and ₹60,000. The profit during the year were ₹45,000. According
to partnership deed, both partners are allowed salary, ₹700 per month to Anubha and ₹500
per month to Kajal. Interest is allowed on capital @ 5% p.a. The drawings during the period
were ₹8,500 for Anubha and ₹6,500 for Kajal. Interest is to be charged @ 5% p.a. on drawings.
Prepare partners capital accounts, assuming that the capital accounts are fluctuating.
[Ans. Divisible Profit ₹23,476; Capital Account balance : Anubha ₹ 1,09,838 and Kajal
₹70,162. Interest on Drawings : Anubha ₹213 and Kajal ₹163.]
Hint: Interest on Drawings will be charged for six months.
Q. 3. A and B started a partnership business on 1 st April, 2021. They contributed ₹ 6,00,000
and ₹ 4,00,000 respectively, as their capitals. The terms of the partnership agreement are as
under :
(i) Interest on capital and drawings @ 6% per annum.
(ii) B is to get a monthly salary of ₹2,500.
(iii) Sharing of profit or loss will be in the ratio of their capital contribution.
The profit for the year ended 31st March, 2022, before making above appropriations was
₹2,07,400. The drawings of A and B were ₹48,000 and ₹40,000 respectively. Interest on
drawings amounted to ₹ 1,500 for A and ₹ 1,100 for B.
Prepare profit and loss appropriation account and partner’s capital accounts assuming that
their capitals are fluctuating.
[Ans. Divisible Profits ₹ 1,20,000; A’s Capital Balance ₹6,58,500 and B’s Capital Balance
₹4,60,900.]
Q.4 Amit and Vijay started a partnership business on 1st April, 2022. Capital invested by them
were ₹ 2,00,000 and ₹ 1,50,000 respectively. The Partnership Deed provided as follows:
(a) Interest on capital be allowed @ 10% p.a.
(b) Amit to get a salary of₹ 2,000 per month and Vijay ₹ 3,000 per month.
(c) Profits are to be shared in the ratio of 3 :2.
Net Profit for the year ended 31st March, 2023 was ₹ 2,16,000. Interest charged on drawings
was ₹ 2,200 for Amit and ₹ 2,500 for Vijay.
Prepare Profit & Loss Appropriation Account.
[Ans.: Share of Profit: Amit- ₹ 75,420; Vijay—₹ 50,280.]
Q. 5 Sonu and Raj at were partners sharing profits and losses in the ratio of 3 : 2. Their capitals
were ₹ 8,00,000 and ₹6,00,000 respectively. The partnership deed provided that Sonu was to
be paid a salary of ₹20,000 per month and Rajat a commission of 5% on turnover. It also
provided that interest on capital be allowed @8% p.a. Sonu withdrew ₹20,000 on 1st
December, 2017 and Rajat withdrew ₹5,000 at the end of each month. Interest on drawings
was charged @ 6% p.a. The net profit as per Profit and Loss Account for the year ended 31st
March, 2018 was ₹4,89,950. The turnover of the firm for the year ended 31st March, 2018
amounted to ₹20,00,000. Pass necessary journal entries for the above transactions in the
books of Sonu and Rajat. (C.B.S.E. 2019, M.P.)
[ Ans. Divisible Profit ₹40,000.]
[Ans.: Share of Profit: Amit- ₹ 75,420; Vijay—₹ 50,280.]
Q.6 Aseem and Nihar started business on 1st April, 2022 with capitals of ₹ 3,00,000 and ₹
2,00,000 respectively. According to the Partnership Deed, Nihar is to get salary of ₹ 5,000 per
month, Aseem is to get 10% commission on Profit after allowing salary to Nihar and interest
is to be allowed on capitals @ 6% p.a. Profit-sharing ratio between the two partners is 3 : 2.
Aseem gave loan of ₹ 1,00,000 to the firm on 1st April, 2022. Interest on loan was agreed to
be allowed @ 8% p.a. Nihar was given loan of ₹ 2,00,000 on 1st October, 2022 on which
interest was charged @ 8% p.a. Manager was to be allowed commission of ₹ 3,000. Profit of
the firm before these adjustments was ₹ 2,50,000.
Pass Journal entries for distribution of profit and prepare Profit & Loss Appropriation Account.
The firm closes its books of account on 31st March every year.
Q.7.Sonu and Rajat started a partnership firm on 1st April, 2017. They contributed ₹ 8,00,000
and ₹ 6,00,000 respectively as their capitals and decided to share profits and losses in the
ratio of 3 : 2. The Partnership Deed provided that Sonu was to be paid a salary of ₹ 20,000
per month and Rajat a commission of 5% on turnover. It also provided that interest on capital
be allowed @ 8% p.a. Sonu withdrew ₹ 20,000 on 1st December, 2017 and Rajat withdrew ₹
5,000 at the end of each month. Interest on drawings was charged @ 6% p.a. The net profit
as per Profit & Loss Account for the year ended 31st March, 2018 was ₹ 4,89,950. The
turnover of the firm for the year ended 31st March, 2018 amounted to ₹ 20,00,000.
Pass necessary Journal entries for the above transactions in the books of Sonu and Rajat.

Q 8 A and B are partners sharing profits and losses in the ratio of 3 : 1. On 1 st April, 2022,
their capitals were: A ₹ 5,00,000 and B ₹ 3,00,000. During the year ended 31st March, 2023,
the firm earned a net profit of ₹ 5,00,000. The terms of partnership are:
(a) Interest on capital is to be allowed @ 6% p.a.
(b) A will get a commission @ 2% on net sales.
(c) B will get a salary of ₹ 5,000 per month.
(d) B will get commission of 5% on profits after deduction of all expenses including such
commission.
Partners' drawings for the year were: A ₹ 80,000 and B ₹ 60,000. Net Sales for the year was
₹ 30,00,000.
After considering the above facts, you are required to prepare Profit & Loss Appropriation
Account and Partners'Capital Accounts.
[Ans.: Commission of B—₹ 15,810; Share of Profit: A—₹ 2,37,140; B—₹ 79,050;
Capital A/cs: A—₹ 7,47,140; 6—₹ 4,12,860.]
Q.9 Amit, Binita and Charu are three partners. On 1st April, 2022, their Capitals stood as: Amit
₹ 1,00,000, Binita ₹ 2,00,000 and Charu ₹ 3,00,000. It was decided that:
(a) they would receive interest on Capitals @ 5% p.a.,
(b) Amit would get a salary of ₹ 10,000 per month,
(c) Binita would receive commission @ 5% of net profit after deduction of commission, and
(d) 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 31 st March, 2023
was ₹ 5,00,000.
Prepare Profit & Loss Appropriation Account and the Capital Accounts of the Partners.
[Ans.: Divisible Profit—₹ 2,76,190; Commission (Binita)— ₹ 23,810; General Reserve—₹
50,000;
Share of Profit: Amit—₹ 92,063; Binita—₹ 92,063, Charu—₹ 92,064;
Closing Balances of Capital A/cs: Amit— ₹ 3,17,063; Binita—₹ 3,25,873; Charu—₹
4,07,064.]
Q. 10. Lata and Mamta are partners with capitals of ₹3,00,000 and ₹2,00,000 respectively
sharing profits as Lata 70% and Mamta 30%. During the year ended 31st March 2023 they
earned a profit of ₹2,26,440 before allowing interest on partner’s loan. The terms of
partnership are as follows:
(i) Interest on Capital is to be allowed @ 7% p.a.
(ii) Lata to get a salary of ₹2,500 per month.
(iii) Interest on Mamta’s Loan account of ₹80,000 for the whole year.
(iv) Interest on drawings of partners at 8% per annum. Drawings being Lata ₹36,000 and
Mamta ₹48,000.
(v) 1/10th of the distributable profit should be transferred to General Reserve.
Prepare the Profit and Loss Appropriation Account.
[Ans. Share of Profit: Lata ₹ 1,00,800 and Mamta ₹43,200.]
Hints : (i) Interest on Loan will be calculated at 6% p.a.
(ii) Interest on Drawings will be calculated for an average period of 6 months.
(iii) Transfer to General Reserve will be 10% of net profit, i. e., 10% of 1,60,000 = ₹ 16,000.
Q.11 P and Q are partners sharing profits and losses in the ratio of 60 : 40. On 1 st April, 2022,
their capitals were : P— ₹5,00,000 and Q— ₹3,00,000. During the year ended 31st March,
2023, they earned a profit of ₹7,60,000 before taking into account any of the following terms
of partnership :
(i) Interest on the capital is to be charged @ 8% p.a.
(ii) P will get commisson @ 3% on turnover.
(iii) Q will get a salary of ₹5,000 per month.
(iv) Q will get commission of 5% on profits after deduction of interest, salary and commission
(including his own commission).
(v) P is entitled to a rent of ₹20,000 per month for the use of his premises by the firm.
Partner’s drawings for the year were : P — ₹40,000 and Q — ₹30,000. Turnover for the year
was ₹20,00,000. After considering the above factors, you are required to prepare the Profit
and loss Appropriation Account and the Capital Accounts of the Partners.
[Ans. Share of Profit P ₹1,92,000 and Q ₹1,28,000. Balance of Capital A/cs P ₹7,52,000 and
Q ₹4,98,000.]
Hints : (i) Net Profit Credited to P & L Appropriation A/c : ₹7,60,000 - Rent ₹2,40,000 = ₹
5,20,000
5
(ii) Q's Commission 105 of ₹3,36,000
(iii) Rent will be credited to Rent Payable Account.

Q. 12. Asif and Ravi are partners in a firm sharing profits and losses in the ratio of 3 : 2. Their
fixed capitals as on 1st April, 2016, were ₹6,00,000 and ₹4,00,000 respectively.
Their partnership deed provided for the following :
(a) Partners are to be allowed interest on their capitals @ 10% per annum.
(b) They are to be charged interest on drawings @ 4% per annum.
(c) Asif is entitled to a salary of ₹2,000 per month.
(d) Ravi is entitled to a commission of 5% of the correct net profit of the firm before charging
such commission.
(e) Asif is entitled to a rent of ₹3,000 per month for the use of his premises by the firm.
The net profit of the firm for the year ended 31st March, 2017, before providing for any of the
above clauses was ₹4,00,000.
Both partners withdrew ₹5,000 at the beginning of every month for the entire year.
You are required to prepare a Profit and Loss Appropriation Account for the year ended 31 st
March, 2017. (I.S.C. 2018)
[ Ans. Divisible Profit ₹2,24,400.]
Commission 5% on ₹3,64,000 = ₹ 18,200.
Q. 13 D, E and F were partners in a firm sharing profits in the ratio of 5 : 7 : 8. Their fixed
capitals on 1st April, 2020 were D ₹5,00,000, E ₹7,00,000 and F ₹ 8,00,000. Their partnership
Deed provided for the following :
(i) Interest on capital @10% p.a.
(ii) Salary of ₹ 10,000 per month to F.
(iii) Interest on drawing @12% p.a.
D withdrew ₹40,000 on 30th April, 2020; E withdrew ₹50,000 on 30th June 2020 and F
withdrew ₹30,000 on 31st March, 2021.
During the year ended 31st March, 2021 the firm earned a profit of ₹3,50,000.
Prepare the Profit and Loss Appropriation Account for the year ended 31 st March, 2021.
[Ans. Share of Profit D ₹9,725; E ₹13,615 and F ₹ 15,560.]
Q. 14. Shiv and Hari entered into partnership on 1st April, 2022, contributing ₹5,00,000 and
₹2,00,000 respectively. Hari also introduced ₹ 1,00,000 as additional capital on 1 st July, 2022.
They agreed to share profits and losses in the ratio of 3 : 2. Following information is provided
regarding the partnership :
(i) Shiv and Hari, each are allowed a salary of ₹ 5,000 per quarter.
(ii) Interest is to be allowed on Capitals @ 8% p.a. and charged on drawings at 10% p.a.
Drawings of Shiv and Hari during the year were ₹ 12,000 and ₹ 10,000 respectively. Profit as
at 31st March, 2023 before the above mentioned adjustments was ₹ 1,96,000.
Prepare :
(i) Necessary journal entries relating to appropriation of profits,
(ii) Profit and Loss Appropriation A/c, and
Q.15 Rahim and Sudesh, the two partners of a business firm, agreed to appropriate the profits
of their firm on the following terms :
(a) Interest is payable on capital @ 5% per annum.
(b) Rahim will be entitled to a salary of ₹500 per month.
(c) Loan advanced by a partner to the firm is to carry interest @ 10% per annum.
(d) Interest on drawings to be charged from the partners @ 5% per annum.
(e) Sudesh will get commission @ 1 % on the sales made during the year.
if) Rahim is entitled to a rent of ₹25,000 per annum for allowing the firm to carry on the
business in his premises.
The net profit of the firm for the year ended 31st March, 2023, was ₹ 1,75,500 before taking
into account any of the above terms.

Particulars Rahim Sudesh

₹ ₹

Capital Balances on 1 st April, 2022 1,50,000 1,40,000

Loan advanced to the Firm on 1st October, 2022 — 1,00,000

Drawings made during the year 40.000 30,000

Loan taken from the firm on 1st July 2022 @ 12% p.a. 50.000

During the year 2022-23, sales of the firm amounted to ₹7,00,000.

From the above information, prepare :
(a) Profit and Loss Appropriation Account.
(b) Partner’s Capital Accounts.
(c) Rent Payable Account.
Q 16 .A and B are partners with capitals of ₹5,00,000 and ₹ 3,00,000 respectively. The profit
for the year ended 31st March 2022 was ₹ 3,46,000 before allowing interest on
partner’s loan. Show the distribution of profit after taking the following into consideration:
(i) Interest on A’s Loan of ₹ 1,50,000 to the firm provided on 1st April, 2021.
(ii) Interest on capital to be allowed @ 5% p.a.
(iii) Interest on drawings @ 6% p.a. Drawings were A ₹60,000 and B ₹40,000.
(iv) B is to be allowed a Commission of 2% on sales. Sales for the year were ₹30,00,000.
(v) 10% of the divisible profits is to be set aside to General Reserve.
FIXED CAPITAL
Q 17 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 distributed as:
(a) The first ₹ 20,000 in proportion to their capitals.
(b) Next ₹ 30,000 in the ratio of 5 : 3 : 2.
(c) 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. (Foreign 2009)
[Ans.: Divisible Profit—₹ 1,40,000; A's share—₹ 50,000; B's share—₹ 44,000; C's share—₹
46,000.]
Q.18 A, B and C were partners in a firm having capitals of ₹60,000; ₹60,000 and ₹80,000
respectively. Their Current Account balances were A : ₹ 10,000; B : ₹5,000 and C : ₹2,000
(Dr.). According to the partnership deed 10% of the net profit is to be transferred to General
Reserve and the partners were entitled to interest on capital @ 5% 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 follows
:
(a) The first ₹20,000 in proportion to their capitals.
(b) Next ₹30,000 in the ratio of 5 : 3 : 2.
(c) Remaining profits to be shared equally.
The firm made a profit of ₹ 1,80,000 for the year ended 31 st March, 2022 before charging
any of the above items. Prepare the Profit & Loss Appropriation Account and pass necessary
journal entry for apportionment of divisible profit.
Q 19.X and Y are partners sharing profits and losses in the ratio of 7 : 3. Their Capital Accounts
as at 1st April, 2022 were X—₹ 5,00,000; Y—₹ 4,00,000. Partners are allowed interest on
capital @ 5% p.a. Drawings of the partners during the year ended 31st March, 2023 were ₹
72,000 and ₹ 50,000 respectively. Profit for the year before allowing interest on capital and
salary to Y @ ₹ 5,000 per month was ₹ 8,00,000. 10% of the net profit is to be set aside to
General Reserve.
Prepare Profit & Loss Appropriation Account for the year ended 31st March, 2023, and Capital
and Current Accounts of the partners
Q. 20 On 1st April, 2021 the balances of A and B were as follows :—

Capital Account Current Account

₹ ₹

A 1,00,000 (Cr.) 8,420

B 40,000 (Dr.) 3,200

On 1st July, 2021 ,A withdrew ₹20,000 from his capital and B introduced ₹ 10,000 as further
capital on the same date. According to the deed, interest on capitals is to be allowed at 8%
p.a. but no interest is to be allowed or charged on current account balances and drawings. A
 3 2
is entitled to and B of the profit. The manager of the firm is entitled to a commission of 10%
5 5
of the profit before any adjustment is made according to the deed. For the year ended 31st
March, 2022, the profit was ₹40,000 and the drawings of A and B were ₹ 12,000 and ₹ 10,000
respectively. Prepare the P & L Appropriation A/c, Capital Accounts and Current Accounts.
[Ans. Manager’s commission ₹4,000; Divisible Profit ₹25,400; Current Account balances : A ₹
18,460 (Cr.) and B ₹760 (Cr.); Capital Account balances : A ₹80,000 and B ₹50,000.]
Q. 21 A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. The balance
in their capital and current accounts as on 1-4-2021 were as under :

A B

(₹) (₹)

Capital Account 40,000 20,000

Current Account (Cr.) 16,000 12,000

The partnership deed provided that A is to be paid salary @ ₹500 p.m. whereas P> is to get
commission of ₹4,000 for the year.
Interest on capital is to be allowed @ 6% p.a. The drawings of A and B for the year were
₹5,000 and ₹2,000, respectively. Interest on drawings for A and B works out at ₹225 and ₹75
respectively. The net profit of the firm for the year ended 31st March, 2022 before making
these adjustments was ₹35,700.
Prepare the Profit and Loss Appropriation Account and the Partners Capita! and Current
Accounts.
[Ans Divisible Profits ₹22,400; Balances of Capital Accounts :— A ₹40,000; B ₹20,000.
Balances of Current Accounts :—A ₹32,615; B ₹24,085.]
Q.22. Shankar and Manu are partners in a firm. On 1st April, 2014, their fixed capital accounts
showed a balance of ₹2,00,000 and ₹4,00,000 respectively.
On this date, their current account balances were ₹ 50,000 and ₹ 1,00,000 respectively.
On 1st January, 2015, Shankar introduced additional capital of ₹2,00,000 while Manu gave a
loan of ₹ 1,50,000 to the firm.
The clauses of their partnership deed provided for :
(a) Interest on capital to be allowed at the rate of 10% per annum.
(b) Interest on drawings to be charged at the rate of 12% per annum.
(c) Profits to be shared by them in the ratio of 3 : 2.
(d) 10% of the correct net profit to be transferred to General Reserve.
During the financial year 2014-15, both partners withdrew ₹6,000 each at the beginning of
every quarter.
The net profit of the firm, before any interest, for the financial year 2014-15 was ₹5,00,000.
You are required to prepare for the year 2014-15 :
(i) Profit and Loss Appropriation Account.
(ii) Partners’ Fixed Capital Accounts.
(iii) Partners’ Current Accounts.
(iv) Partner’s Loan Account. (I.S.C. 2016)
[Ans. Divisible Profit ₹3,86,575; Current A/cs balances : Shankar ₹2,81,145 and Manu
₹2,68,830.]
Interest on Drawings
Q. 23. Calculate the interest on Drawings of Tarun @ 8% p.a. for the year ended 31 st March,
2022 in each of the following alternative cases :
Case (a) if his drawings during the year were ₹60,000;
Case (b) if he withdrew ₹5,000 p.m. in the beginning of every month;
Case (c) if he withdrew ₹5,000 p.m. at the end of every month;
Case (d) if he withdrew ₹5,000 p.m. during the year;
Case (e) if he withdrew the following amounts as under :
2021 June, 1 : ₹ 10,000; August 31 : ₹ 12,000; November 1 : ₹ 16,000; December 31 : ₹
13,000; February 1, 2022 : ₹9,000.
[Ans. Case (a) ₹2,400; Case (b) ₹2,600; Case (c) ₹2,200; Case (d) ₹2,400; Case (e) ₹2,140.]
Q. 24. Calculate the interest on Drawings of Anuradha @ 9% p.a. for the year ended 31st
March 2022, if she withdrew ₹ 10,000 in the beginning of each quarter.
[Ans. ₹2,250.]
Q. 25 Calculate the interest on Drawings of Bipasa @ 9% p.a. for the year ended 31st March
2022, if she withdrew ₹ 10,000 at the end of each quarter.
[Ans. ₹ 1,350.]
Q. 26. Calculate the interest on Drawings of Charulata @ 9% p.a. for the year ended 31 st
March, 2022, if she withdrew ₹ 10,000 each quarter.
[Ans. ₹ 1,800.]
Q. 27. Calculate the interest on Drawings of Divya @ 9% p.a. if she withdrew ₹ 4,000 p.m. on
the first day of every month for six months ending 31st March, 2021.
[Ans. ₹630.]
Q. 28. Calculate the interest on Drawings of Esha @ 9% p.a., if she withdrew ₹4,000 p.m. on
the last day of every month for six months ending 31st March, 2021.
[Ans. ₹450.]
Q. 29. Calculate the interest on Drawings of Garima @ 9% p.a., if she withdrew ₹4,000 p.m.
for six months ending 31st March, 2021.
[Ans. ₹540.]
Q. 30. Seema and Tina are partners in a firm. Interest on drawings is charged @ 10% p.a.
You are required to calculate the amount of drawings of each partner in the following cases :
(i) Seema withdrew a fixed amount in the beginning of each month and interest on drawings
is ₹3,900.
(ii) Tina withdrew a fixed amount in the beginning of each quarter and interest on drawings is
₹6,000.
[Ans. Case (i) ₹6,000 per month, and Case (ii) ₹24,000 per quarter.]
Hint. Refer Illustration 30.
Q. 31. Era, a partner withdrew ₹40,000 per month for her personal use from the firm in the
beginning of each month. Interest on her drawings was calculated at ₹31,200 at the end of the
year. Calculate the rate of interest on her drawings.
[Ans. Rate of Interest 12% p.a.]
Hint. Refer Illustration 28.
Q. 32 Calculate the rate of interest on drawings in the following cases :
(i) Charu and Suruchi are partners in a firm. Suruchi withdrew ₹ 12,000 in the beginning of
each quarter and interest on drawings was calculated at ₹2,700 at the end of the year.
(ii) Yamini and Sonia are partners in a firm. Sonia withdrew ₹ 12,000 at the end of each quarter
and interest on drawings was calculated at ₹ 1,440 at the end of the year.
[Ans. Case (/) 9% p.a.; and Case (ii) 8% p.a.]
Q. 33. Gopal is a partner in a firm. He withdrew ₹ 1,000 p.m. regularly on the first day of every
month during the year ended 31st March, 2022 for personal expenses. If interest on drawings
is charged @ 15% p.a. calculate the interest on the drawings of Gopal.
[Ans. Interest on Drawings ₹975.]
Q. 34. X, Y and Z are partners in a firm. You are informed that (i) X draws ₹4,000 from the firm
at the beginning of every month, (ii) Y draws f4,000 from the firm at the end of every month,
and (iii) Z draws ₹4,000 from the firm in the middle of every month. Interest on drawings is to
be charged @ 9% p.a. Calculate interest on partner’s drawings.
[Ans. Interest on Drawings X ₹2,340; Y ₹ 1,980 and Z ₹2,160.]
Q. 35 Calculate the interest on drawings of Mr. Aditya @ 8% p.a. for the year ended 31 st
March, 2021, in each of the following alternative cases :
Case (/) If he withdrew ₹ 5,000 in the beginning of each quarter.
(ii) If he withdrew ₹6,000 at the end of each quarter.
(iii) If he withdrew ₹ 10,000 during the middle of each quarter.
[Ans. Case (i) ₹ 1,000; Case (ii) ₹720; Case (iii) ₹ 1,600.]
Q. 36 Calculate the interest on drawings of Sh. Ganesh @ 9% p.a. for the year ended 31st
March, 2021, in each of the following alternative cases :
Case (i) If he withdrew ₹4,000 p.m. in the beginning of every month;
(ii) If he withdrew ₹ 5,000 p.m. at the end of every month.;
(iii) If he withdrew ₹ 6,000 p.m;
(iv) If he withdrew ₹ 72,000 during the year;
(v) If he withdrew as follows :
₹
30th April, 2020 10,000
1st July, 2020 15,000
1st Oct., 2020 18,000
30th Nov., 2020 12,000
31st March, 2021 20,000
(vi) If he withdrew ₹ 12,000 in the beginning of each quarter;
(vii) If he withdrew ₹ 18,000 at the end of each quarter;
(viii) If he withdrew ₹ 18,000 during the middle of each quarter.
[Ans. Case (i) ₹2,340; Case (ii) ₹2,475; Case (iii) ₹3,240; Case (iv) ₹ 3,240; Case (v) ₹3,008;
Case (vi) ₹2,700; Case (vii) ₹2,430; Case (viii) ₹3,240.|
Q. 37 Gupta is a partner in a firm. He drew regularly ₹800 at the beginning of every month for
the six months ending 31st March, 2022. Calculate interest on drawings at 15% p.a.
[Ans. Interest on Drawings ₹210.]
Q. 38. Gupta is a partner in a firm. He drew regularly ₹800 at the end of every month for the
six months ending 31st March, 2022. Calculate interest on drawings at 15% p.a.
[Ans. Interest on Drawings ₹ 150.]
Q. 39. A, B and C are partners in a firm. For six months ending 31st March, 2022 :
A drew regularly ₹ 15,000 in the beginning of every month. B drew regularly ₹20,000 at the
end of every month and C drew regularly ₹25,000 in the middle of every month.
Calculate interest on drawings @ 10% p.a. for six months ending 31st March, 2018.
[Ans. Interest on Drawings : A ₹2,625; B ₹2,500 and C ₹3,750.]
Q. 40. Calculate interest on A’s drawings :
(i) If he has withdrawn ₹60,000 on 1st October, 2022 and rate of interest on drawings is 8%
per annum.
(ii) If he has withdrawn ₹60,000 on 1st October, 2022 and rate of interest on drawings is 8%.
Books are closed on 31st March, 2023.
[Ans. Case (i) ₹2,400; Case (ii) ₹4,800.]
Q.41. Charu is a partner in a firm. She withdrew the following amounts during the year ended
on 31st March, 2023 :—
₹
May 1 20,000
July 31 10,000
September 30 30,000
November 30 40,000
January 1 20,000
March 31 25,000
Interest on drawings is to be charged @ 9% p.a. Calculate interest on drawings.
Q. 42. Mr. Ashok Gupta is a partner in a firm. He withdrew the following amounts during the
year ended 31st March, 2022 :—
₹
April 30 8,000
June 30 6,000
Sept. 30 5,000
Dec. 31 12,000
Jan. 31 10,000
Calculate interest on drawings @ 9% p.a. for the year ended on 31 st March, 2022. [Ans
Interest on Drawings ₹ 1,710.]
Q. 43 A is a partner in a firm. During the year ended 31st March, 2022, A’s drawings were :

₹
1st June 1,000

1 st August 750

1 st October 1,250

1 st December 500

1st February 500

Interest on drawings is charged @ 10% per annum. Calculate interest on drawings of A for
the year ended 31st March, 2022.
[Ans. Interest on Drawings ₹221]
Q. 44
A, B and C are partners in a firm. You are informed that:
(i) A draws ₹ 10,000 from the firm in the beginning of every month,
(ii) B draws ₹ 10,000 from the firm at the end of every month, and
(ii) C draws ₹ 10,000 from the firm in the middle of every month.
Interest on drawings is to be charged @ 8% p.a. Calculate interest on partner’s
drawings.
Q.45. Calculate the interest on drawings of Mr. Navdeep @ 10% p.a. for the year ended 31st
March, 2021 in each of the following alternative cases :
Case (a) If he withdrew ₹20,000 in the beginning of each quarter.
Case (b) If he withdrew ₹ 20,000 at the end of each quarter.
Case (c) If he withdrew ₹20,000 during the middle of each quarter
Q.46 Calculate the interest on drawings of Mr. Arun @ 10% p.a. for the year ended 31st March,
2021 in each of the following alternative cases :
Case (a) If he withdrew ₹ 5,000 p.m. in the beginning of every month;
Case (b) If he withdrew ₹ 5,000 p.m. at the end of every month;
Case (c) If he withdrew ₹ 5,000 p.m. during the year;
Case (d) If he withdrew ₹ 60,000 during the year;
Case (e) If he withdrew as follows :

1st June, 2020 20,000

31st August, 2020 10,000

31st Oct., 2020 18,000

1st Feb., 2021 12,000

Case (f) If he withdrew ₹ 15,000 in the beginning of each quarter;

Case (g) If he withdrew ₹ 15,000 at the end of each quarter;
Case (h) If he withdrew ₹15,000 during the middle of each quarter.
Q. P, Q and R are partners in a firm. You find that:
(j) P drew ₹6,000 in the beginning of every month for 6 months ending 31st March, 2022.
(ii) Q drew ₹6,000 at the end of every month for 6 months ending 31st March, 2022.
(iii) R drew ₹6,000 in the middle of every month for 6 months ending 31 st March, 2022.
Calculate interest on drawings @ 8% p.a.
INSUFFICIENT PROFITS
Q.47.X and Y are partners with a profit sharing ratio of 1 : 2 with capitals of ₹4,00,000 and
₹6,00,000 respectively. On 1st October, 2021 X and Y granted loans of ₹ 1,00,000 and
₹60,000 respectively to the firm. Distribute the profit/losses amongst the partners for the year
ended 31st March, 2022 in each of the following cases:
Case (a) If the profit before interest for the year amounted to ₹ 12,000.
(b) If the profit before interest for the year amounted to ₹3,000.
(c) If the loss before interest for the year amounted to ₹7,500
Q.48. A and B are partners in a firm. On 1st April, 2021 their Capitals were ₹3,00,000 and
₹2,00,000 respectively. On 1st October, 2021 A granted a loan of ₹50,000 to the firm. B had
allowed the firm to use his property for business for a monthly rent of ₹ 10,000. The partnership
deed provides that interest on capital will be allowed @ 9% p.a. and B is to be allowed an
annual salary of ₹ 1,00,000.
The firm incurred a loss of ₹28,500 for the year ended 31 st March 2022 before any adjustment
is made according to the partnership deed.
Prepare an account showing the distribution of profit/loss.
(Appropriations as per Partnership Deed or Agreement are more than Distributable Profit).
Q.49. Ajay and Vijay are partners sharing profits in the ratio of 3:2. Ajay is a non-working
partner and contributes ₹ 20,00,000 as his capital. Vijay is a working partner of the firm. The
Partnership Deed provides for interest on capital @ 8% p.a. and salary to working partner of
₹ 8,000 per month. Profit before providing for interest on capital and partner's salary for the
year ended 31st March, 2023 was ₹ 80,000. Show the distribution of profit.

Q. 50 A and B are partners sharing the profits and losses in the ratio of 3 : 2 with capitals of
₹2,00,000 and ₹ 1,00,000 respectively. Show the distribution of profits in each of the following
alternative cases :
Case (i) If the partnership deed is silent as to the Interest on Capital and the profits for the
year are ₹50,000.
Case (ii) If the partnership deed provides for Interest on Capital @ 8% p.a. and the losses for
the year are ₹ 50,000.
Case (iii) If the partnership deed provides for Interest on Capital @ 8% p.a. and the profits for
the year are ₹50,000.
Case (iv) If the partnership deed provides for Interest on Capital @ 8% p.a. and the profits for
the year are ₹ 15,000.
Case (v) If the partnership deed provides for Interest on Capital @ 8% p.a. even if it involves
the firm in loss and the profits for the year are ₹ 15,000.
Q. 51 X and Y are partners sharing profits and losses in the ratio of 2 : 3 with capitals of ₹
2,00,000 and ₹ 1,00,000 respectively. Pass the necessary Journal entry or entries for
distribution of profit/loss for the year ended 31st March, 2023 in each of the alternative cases:
Case 1. If Partnership Deed does not provide for interest on capital and the profit for the year
is ₹ 20,000.
Case 2. If Partnership Deed provides for interest on capital @ 6% p.a. and loss for the year is
₹ 15,000.
Case 3. If Partnership Deed provides for interest on capital @ 6% p.a. and the profit for the
year is ₹ 21,000.
Case 4 If Partnership Deed provides for interest on capital @ 6% p.a. as a charge on profit
and the profit for the year is ₹ 20,000.
Case 5. If Partnership Deed provides for interest on capital @ 6% p.a. as a charge on profit
and the profit for the year is ₹ 2,000.
Case 6. If Partnership Deed provides for interest on capital @ 6% p.a. as a charge on profit
and the profit for the year is ₹ 18,000.

PAST ADJUSTMENTS
Q.52 Raja, Roopa and Mala sharing profits and losses equally have fixed capitals of ₹
12,00,000, ₹9,00,000 and ₹6,00,000 respectively. For the year ended 31 st March, 2021,
interest was credited to them @ 6% instead of 5% p.a. Give adjusting entry.
[Ans. ₹ ₹
Raja’s Current A/c Dr. 3,000
To Mala’s Current A/c 3,000]
53 (Interest on Capital Allowed at Higher Rate).
X, Y and Z are partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. Their fixed
capitals were ₹ 3,00,000; ₹ 2,00,000 and ₹ 1,00,000 respectively. For the year ended 31st
March, 2023, interest on capital was credited to them @ 10% p.a. instead of 8% p.a.
Showing your working notes clearly, pass necessary adjustment Journal entry.
54. (Rectification of Interest on Capital less Allowed).
A, B and C are partners in a firm sharing profits in the ratio of 2 : 2 : 1. Their capitals (fixed)
are ₹ 1,00,000; ₹ 80,000 and ₹ 70,000 respectively. For the year ended 31st March, 2023,
interest on capital was credited to them @ 9% p.a. instead of 12%. Give the adjustment
Journal entry.
Q. 55. P and Q were partners in a firm sharing profits in 7 : 3 ratio. Their fixed capitals were P
₹5,00,000 and Q ₹8,00,000. For the year ended 31st March, 2021, interest on capital was
credited @ 12% instead of 10%. Show the necessary adjusting entry for the rectification of the
error. Also show the working notes clearly.
[Ans. ₹ ₹
Q’s Current A/c Dr. 8,200
To P's Current A/c 8,200]
Q.56. A, B and C are partners. Their fixed capitals as on 31st March, 2021 were A ₹2,00,000,
B ₹3,00,000 and C ₹4,00,000. Profits for the year ended 31st March, 2021 amounting to ₹
1,80,000 were distributed. Give the necessary adjusting entry in each of the following
alternative cases :
Case (a) Interest on capital was credited @ 8% p.a. though there was no such provision in the
partnership deed.
Case (b) Interest on capital was not credited @ 8% p.a. though there was such provision in
the partnership deed.
Case (c) Interest on capital was credited @ 8% p.a. instead of 10% p.a.
Case (d) Interest on capital was credited @ 10% p.a. instead of 8% p.a.
[Ans. Debit C’s Current A/c and Credit A’s Current A/c with ₹8,000;
Debit /4’s Current A/c and Credit C’s Current A/c with ₹8,000;
Debit A’s Current A/c and Credit C’s Current A/c with ₹2,000;
Debit C’s Current A/c and Credit A’s Current A/c with ₹2,000;]
Q.57 P, Q and R are partners in a firm sharing profits and losses in the ratio of 2 : 1 : 2. Their
fixed capitals were ₹3,00,000; ₹ 1,00,000 and ₹2,00,000 respectively. Interest on capital for
the year ended 31st March, 2023 was credited to them @ 9% p.a. instead of 12% p.a. The
profit for the year before charging interest was ₹2,50,000. Prepare necessary adjustment
entry.
Q. 58. Rajeev and Sanjeev were partners in a firm. Their partnership deed provided that the
profits shall be divided as follows :
First ₹20,000 to Rajeev and the balance in the ratio of 4 : 1. The profits for the year ended 31
st March, 2017 were ₹60,000 which had been distributed among the partners. On 1-4-2016
their capitals were Rajeev ₹ 90,000 and Sanjeev ₹ 80,000. Interest on capital was to be
provided @6% p.a. While preparing the profit and loss appropriation interest on capital was
omitted.
Pass necessary rectifying entry for the same. Show your workings clearly.
Q 59. A, B and C are partners in a firm sharing profits and losses in the ratio of 2 : 3 : 5. Their
fixed capitals were ₹ 15,00,000, ₹30,00,000 and ₹60,00,000 respectively. For the year ended
31st March, 2023 interest on capital was credited to them @ 12% instead of 10%. Pass the
necessary adjustment entry
Q.60 Mudit and Uday are partners in a firm sharing profits in the ratio 2:3. Their capital
accounts as on April 1, 2015 showed balances of ₹70,000 and ₹60,000 respectively. The
drawings of Mudit and Uday during the year 2015-16 were ₹ 16,000 and ₹ 12,000 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.
(a) Interest on capitals @ 6% p.a.;
(b) Interest on drawings @ 6% p.a.;
(c) Mudit was entitled to a commission of ₹4,000 for the whole year.
Showing your workings clearly pass a rectifying entry in the books of the firm.
(C.B.S.E. 2017, Comptt.)
Q.61 The net profit of a firm for the year ended 31st March, 2021, was ₹ 30,000, which has
been duly distributed amongst its three partners A, B and C in their agreed proportions of 3 :
1 : 1 respectively. It was discovered on 10th April, 2021 that the undermentioned transactions
were not passed through the books of accounts of the firm for the year ended 31st March,
2021, which stood duly closed on that date :
(a) Interest on capital at 10% p.a.
(b) Interest on drawings : A ₹350; B ₹250; C ₹150.
(c) Salary of ₹5,000 to A and ₹7,500 to B.
(d) Commission due to A on a special transaction, ₹3,000.
The capital accounts of the partners on 1st April, 2020 were : A ₹25,000; B ₹20,000; C₹
15,000.
You are required to suggest a journal entry to be passed on 10th April, 2021 which will not
affect the Profit and Loss Appropriation Account of the firm for the year ended 31st March,
2021 and at the same time will rectify the position of the partners.
Q. 62 Rohit, Raman and Raina are partners in a firm. Their capital accounts on 1st April, 2019,
stood at ₹2,00,000, ₹ 1,20,000 and ₹ 1,60,000 respectively. Each partner withdrew ₹ 15,000
during the financial year 2019-20.
As per the provisions of their partnership deed :
(a) Interest on capital was to be allowed @5% per annum.
(b) Interest on drawings was to be charged @4% per annum.
(c) Profits and losses were to be shared in the ratio 5:4:1.
The net profit of ₹72,000 for the year ended 31st March 2020, was divided equally amongst
the partners without providing for the terms of the deed.
You are required to pass a single adjustment entry to rectify the error (show workings clearly).
(C.B.S.E. Sample Paper 2020)
Q.63 X, Y and Z were partners in a firm. On 1st April, 2021 their capitals stood at ₹6,00,000,
₹4,00,000 and ₹2,00,000 respectively. As per provisions of the partnership deed :
(i) Y was entitled for commission of ₹ 12,000 p.a.
(ii) X was entitled for a salary of ₹ 1,200 per month.
(iii) Partners were entitled to interest on Capital @ 8% p.a.
(iv) Profits were to be shared in the ratio of Capitals.
Net profit for the year ended 31.03.2022 was ₹4,22,400 which was distributed equally, without
taking into consideration the above provisions. Showing your workings clearly, pass necessary
adjustment entry for the above.
64. Mudit, Sudhir and Uday are partners in a firm sharing profits in the ratio of 3:1:1 .Their
fixed capital balances are ₹ 4,00,000, ₹ 1,60,000 and ₹ 1,20,000 respectively. Net profit for
the year ended 31st March, 2018 distributed amongst the partners was ₹ 1,00,000, without
taking into account the following adjustments:
(a) Interest on capitals @ 2.5% p.a.
(b) Salary to Mudit ₹ 18,000 p.a. and commission to Uday ₹ 12,000.
(c) Mudit was allowed a commission of 6% of divisible profit after charging such commission.
Pass a rectifying Journal entry in the books of the firm. Show workings clearly. (CBSE Sample
Paper2019)
[Ans.: Dr. Sudhir's Current A/c by ₹ 6,000; Cr. Mudit's Current A/c by ₹ 1,000 and Uday's
Current A/c by ₹ 5,000.]
Q.65 A, B and C were partners. Their capitals were ₹30,000; ₹20,000 and ₹ 10,000
respectively on 1st April, 2021. According to the partnership deed they were entitled to an
interest on capital at 5% p.a. In addition B was also entitled to draw a salary of ₹500 per month.
C was entitled to a commission of 5% on the profits after charging the interest on capital, but
before charging the salary payable to B. The net profits for the year ended 31st March, 2022
were ₹30,000, distributed in the ratio of their capitals without providing for any of the above
adjustments. The profits were to be shared in the ratio of 2 : 2 : 1. Pass the necessary
adjustment entry showing the workings clearly.
66. Mohan, Vijay and Anil are partners, the balances of their Capital Accounts being ₹ 30,000,
₹ 25,000 and ₹ 20,000 respectively. In arriving at these amounts profit for the year ended 31
st March, 2023, ₹ 24,000 had been credited to partners in their profit-sharing ratio. Their
drawings were ₹ 5,000 (Mohan), ₹ 4,000 (Vijay) and ₹ 3,000 (Anil) during the year.
Subsequently, following omissions were noticed and it was decided to rectify the errors:
(a) Interest on capital @ 10% p.a.
(b) Interest on drawings: Mohan ₹ 250, Vijay ₹ 200 and Anil ₹ 150.
Make necessary corrections through a Journal entry and show your workings clearly.
[Ans.: Debit Anil by ₹ 550 and Credit Mohan by ₹ 550; Corrected Profit transferred to each
partner ₹ 6,100.]
Q. 67 On March 31, 2022 the capital accounts of Elvin, Monu and Ahmed after making
adjustments for profits, drawings, etc. were as, Elvin — ₹80,000; Monu — ₹60,000; and
Ahmed — ₹40,000. Subsequently, it was discovered that interest on capital and interest on
drawings had been omitted. The partners were entitled to interest on capital @ 5% p.a. The
drawings during the year were : Elvin — ₹20,000; Monu — ₹ 15,000; and Ahmed — ₹9,000.
Interest on drawings chargeable to the partners was Elvin — ₹500; Monu - ₹360 and Ahmed
— ₹200. The net profit for the year ended 31st March, 2022 amounted to ₹ 1,20,000. The
profit sharing ratio of the partners was 3:2:1.
Record the necessary adjustment entry for rectifying the above errors of omission. Show your
workings.
78. Capitals of Kajal, Neerav and Alisha as on 31st March, 2023 were ₹ 90,000, ₹ 3,30,000
and ₹ 6,60,000 respectively. Profit of ₹ 1,80,000 for the year ended 31st March, 2023 was
distributed in the ratio of 4:1:1 after allowing Interest on Capital @ 10% p.a. During the year,
each partner withdrew ₹ 3,60,000. The Partnership Deed was silent as to profit-sharing ratio
but provided for interest on capital @ 12% p.a.
Pass the necessary adjustment entry showing the working clearly.
[Ans.: Debit Kajal by ₹ 66,000 and Credit Neerav by ₹ 30,000 and Alisha by ₹ 36,000.]
Q. 68. (Calculation of Opening Capital)
Aan and Mohan are partners sharing profits and losses in the ratio of 3 : 2. The firm maintains
fluctuating Capital Accounts and the balance in their Capital Accounts as on 31st March, 2023
was R 4,00,000 and ₹ 3,50,000 respectively. Drawings during the year were ₹ 75,000 each.
As per Partnership Deed interest on Capital @ 10% p.a. on Opening Capital had been allowed
to them.
Calculate Opening Capitals of partners given that net profit during the year 2022-23 was ₹
2,25,000. Show your working.
Solution: CALCULATION OF OPENING CAPITAL
Particulars Aan Mohan
₹ ₹
Closing Capital 4,00,000 3,50,000
Add: Drawings 75,000 75,000
4,75,000 4,25,000
Less: Profit already Credited (WN) 94,500 63,000
Opening Capital (including Interest on Capital) 3,80,500 3,62,000
Less: Interest on Capital (WN) 34,591 32,909
Opening Capital 3,45,909 3,29,091

Working Note: ₹
Total Capital of Aan and Mohan = ₹ 4,00,000 + ₹ 3,50,000 = 7,50,000
Add: Total Drawings (of Aan and Mohan = ₹ 75,000 x 2) = 1,50,000
9,00,000
Less: Profits (including interest on capital) 2,25,000
Total capital in the beginning of the year excluding interest on capital for the year= 6,75,000
Interest on Capital:
Aan = ₹ 3,80,500 x 10/110 = ₹ 34,591
Mohan = ₹ 3,62,000 x 10/110 = ₹ 32,909
Divisible Profit = ₹ 2,25,000 - ₹ 67,500 = ₹ 1,57,500 divided in 3 : 2.

Q.** 69 Vihaan and Mann are partners sharing profits and losses in the ratio of 3 : 2. The firm
maintains fluctuating capital accounts and the balance of the same as on 31 st March 2022 is
₹4,00,000 and ₹4,65,000 for Vihaan and Mann respectively. Drawings during the year were
₹65,000 each. As per the partnership Deed, Interest on capital @ 10% p.a. on Opening Capital
has been allowed to them. Calculate the opening capital of partners given that the divisible
profits during the year 2021-22 was ₹2,25,000.
(C.B.S.E. Sample Paper, 2023)
GUARANTEE TO A PARTNER
Q. Q. 70 A, B and C are partners in a firm. Their profit sharing ratio is 3 : 2 : 1. However, C is
guaranteed a minimum amount of ₹ 10,000 as share of profits every year. Any deficiency
arising on that account shall be met by A. The profits for the two years ending 31st March,
2020 and 2021 were ₹30,000 and ₹90,000 respectively. Prepare Profit and Loss Appropriation
Account for the two years.
[Ans. 1 st year ₹ 10,000 each. 2nd year A ₹45,000; B ₹30,000 and C ₹ 15,000]
Q. 71.. X, Y and Z are partners with capitals of ₹4,00,000; ₹3,00,000 and ₹2,00,000
respectively. They charge 8% p.a. interest on their capitals and divide the profits in the ratio
of 3 : 2 : 1. A" has guaranteed that Z’s share shall not amount to less than ₹ 50,000 in any one
year.
Their Drawings during the year were ₹50,000; ₹40,000 and ₹35,000 respectively. Net profits
for the year before providing interest on capitals was ₹2,52,000. Prepare P & L Appropriation
A/c and capital accounts.
[Ans. Profits X ₹70,000; Y ₹60,000; Z ₹50,000.]
Q.72 P, Q and R are partners sharing profits in the ratio of 5 : 4 :1 respectively. R is guaranteed
that his share of profit in any year will be at least ₹ 50,000. Profit for the year ended 31st
March, 2023 is ₹ 3,50,000. Amount of shortfall in the profits of R is to be met by P and Q in
the ratio of 3 : 2. Pass necessary Journal entry regarding deficiency met by P and Q.
Q.73 Pankaj, Naresh and Saurabh are partners in a firm. Their profit-sharing ratio is 5 : 3 : 2.
Saurabh is guaranteed a minimum profit of ₹ 10,000 every year. Any deficiency arising is to
be met by Naresh. Profits for the two years ended 31st March, 2023 and 2024 were ₹ 40,000
and ₹ 60,000 respectively.
Prepare Profit & Loss Appropriation Account for the two years.
Q. 74. Vikas and Vivek were partners in a firm sharing profits in the ratio of 3 : 2. On 1-4-2014
they admit Vandana as a new partner for l/8th share in the profits with a guaranteed profit of
₹ 1,50,000. The new profit sharing ratio between Vikas and Vivek will remain the same but
they decided to bear any deficiency on account of guarantee to Vandana in the ratio 2:3. The
profit of the firm for the year ended 31-3-2015 was ₹9,00,000. Prepare Profit and Loss
Appropriation Account of Vikas, Vivek and Vandana for the year ended 31-3-2015.
(C.B.S.E. 2016)
[Ans. Share of Profit Vikas ₹4,57,500; Vivek ₹2,92,500 and Vandana ₹1,50,000.]
Q. 75. X, Y and Z are partners sharing profits and losses in the ratio of 3 : 2 : 1 with a minimum
profit of 21,00,000 for Z. The profits for the year ended March 31, 2023 amounted to ₹4,80,000.
Pass necessary journal entries in the books of the firm.
[Ans. Share of Profits X ₹2,28,000; Y ₹ 1,52,000 and Z ₹ 1,00,000]
Q.76. Pranshu and Himanshu are partners sharing profits and losses in the ratio of 3 : 2
respectively. They admit Anshu as partner with 1/6 share in the profits of firm. Pranshu
personally guaranteed that Anshu’s share of profit would not be less than ₹30,000 in any year.
The net profit of the firm for the year ending 31st March, 2023 was ₹90,000. Prepare Profit
and Loss Appropriation Account.
[Ans. Share of Profit: Pranshu ₹30,000; Himanshu ₹30,000 and Anshu ₹30,000.]
Q. 77 A, B and C are partners in a firm sharing profits in the ratio of 2 : 2 : 1. According to the
terms of the partnership agreement C has to get a minimum of ₹6,000 irrespective of the
profits of the firm. Any excess payable to C on account of such guarantee shall be borne by
A. Profits earned during the year ended 31st March, 2023 were ₹25,000. Pass journal entries
in the books of the firm.
[Ans. Share of Profits A ₹9,000; B ₹10,000 and C ₹6,000]
Q. 78 A, B and C are partners sharing profits in the ratio of 5 : 4 : 1. C is given a guarantee
that his share of profits in any year will not be less than ₹20,000. The profit for the year ending
31st March 2023 amounts to ₹ 1,40,000. Amount of shortfall in the profits given to C will be
borne by A and B in the ratio of 3 : 2. Pass necessary journal entry regarding deficiency borne
by A and B.
[Ans. A’s Capital Ac Dr. 3,600
B’s Capital Ac Dr. 2,400
To C’s Capital Ac 6,000]
79. Anwar, Biswas and Divya are partners in a firm. Their Capital Accounts stood at ₹
8,00,000; ₹ 6,00,000 and ₹ 4,00,000 respectively on 1st April, 2013. They shared profits and
losses in the ratio of 3 : 2 : 1 respectively. Partners are entitled to interest on capital @ 6% per
annum and salary to Biswas and Divya @ ₹ 4,000 per month and ₹ 6,000 per quarter
respectively as per the provisions of Partnership Deed.
Biswas's share of profit including interest on capital but excluding salary is guaranteed at a
minimum of ₹ 82,000 p.a. Any deficiency arising on that account shall be met by Divya. Profit
for the year ended 31st March, 2014 amounted to ₹ 3,12,000. Prepare Profit & Loss
Appropriation Account for the year ended 31st March, 2014. (Delhi 2013
Q. 80 Maanika, Bhavi and Komal are partners sharing profits in the ratio of 6:4: 1. Komal is
guaranteed a minimum profit of ₹2,00,000. The firm incurred a loss of ₹22,00,000 for the year
ended 31st March, 2018. Pass necessary journal entry regarding deficiency borne by Maanika
and Bhavi and prepare Profit and Loss Account. (C.B.S.E. Sample Paper, 2019)
[Ans. (i) First of all, loss of ₹22,00,000 will be debited to Maanika, Bhavi and Komal in their
profit sharing ratio of 6 : 4 : 1.
(ii) Thereafter, Komal’s deficiency of ₹4,00,000 will be borne by Maanika and Bhavi in 6 : 4. ]
Q. 81 . A and B are in partnership sharing profits and losses in the ratio of 3 : 2. They admit
C, their Manager, as a partner with effect from 1 st April, 2022, for 1 /4th share of profits.
C, while a Manager, was in receipt of a salary of ₹ 27,000 p.a. and a commission of 10% of
net profit after charging such salary and commission.
In terms of the Partnership Deed, any excess amount, which C will be entitled to receive as a
partner over the amount which would have been due to him if he continued to be the Manager,
will be borne by A. Profit for the year ended 31 st March, 2023 amounted to ₹ 2,25,000.
Prepare Profit & Loss Appropriation Account for the year ended 31st March, 2023.
[Ans.: Share of Profit: A—₹ 96,750; B—₹ 72,000; C—₹ 56,250.]
82. 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, 2022. They shared Profits and
Losses in the proportion of 4 : 2 ; 3. Partners are entitled to interest on capital @ 8% per
annum and salary to Chaman and Dholu @ ₹ 7,000 per month and ₹ 10,000 per guarter
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, 2023 amounted to ₹ 4,24,000.
Prepare Profit & Loss Appropriation Account for the year ended 31st March, 2023. (Delhi2013,
Modified)
[Ans.: Share of Profit: Asgar—₹ 70,000; Chaman—₹ 40,000 and Dholu—₹ 70,000.]
[Hint: Deficiency of₹ 10,000 in Dholu's share is recovered from Asgar.]
83. The partners of a firm, Alia, Bhanu and Chand distributed the profits for the year ended
31st March, 2017, ₹ 80,000 in the ratio of 3 : 3 : 2 without providing for the following
adjustments:
(a) Alia and Chand were entitled to a salary of ₹ 1,500 each per month.
(b) Bhanu was entitled for a commission of ₹ 4,000.
(c) Bhanu and Chand had guaranteed a minimum profit of₹ 35,000 p.a. to Alia, any deficiency
to be borne equally by Bhanu and Chand.
Pass the necessary Journal entry for the above adjustments in the books of the firm. Show
workings clearly.
(CBSE Sample Paper 2018)
[Ans.: Dr. Bhanu's Capital A/c by ₹ 21,000 and Chand's Capital A/c by ₹ 2,000; Cr. Mia's
Capital A/c by ₹ 23,000.]
84. 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. (Delhi2016 C)
[Ans.: Dr. Ajay's Capital A/c by₹ 6,400 and Binay's Capital A/c by ₹ 2,000; Cr. Chetan's
Capital A/c by₹ 8,400.]
85. Ankur, Bhavna and Disha are partners in a firm. On 1st Aprjl, 2022, 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 ofthe 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 ofthe
firm for the year ended 31st March, 2023 amounted to ₹ 9,50,000.
Prepare 'Profit & Loss Appropriation Account' for the year ended 31st March, 2023. (Al 2013,
Modified)
[Ans.: Share of Profit: Ankur—₹ 4,14,000; Bhavna—₹ 1,80,000 and Disha—₹ 1,26,000.]
[Hint: Deficiency of ₹ 6,000 is contributed by Ankur for Disha.]
86. Maanika, Bhavi and Komal are partners sharing profits in the ratio of 6 : 4 : 1. Komal is
guaranteed a minimum profit of ₹ 2,00,000. The firm incurred a loss of ₹ 22,00,000 for the
year ended 31st March, 2018. Pass necessary Journal entry regarding deficiency borne by
Maanika and Bhavi and prepare Profit & Loss Appropriation Account. (CBSE Sample Paper
2019)

Minimum Earnings Guranteed by a Partner

87. Three Chartered Accountants Abhijit, Baljit and Charanjit form a partnership, profits being
shared in the ratio of 3 : 2 :1 subject to the following:
(a) Charanjit's share of profit guaranteed to be not less than ₹ 15,000 p.a.
(b) 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.
You are required to show Profit & Loss Appropriation Account after giving effect to the above.
(NCERT, Modified)
[Ans.: Abhijit's Share—₹ 41,400; Baljit's Share—₹ 18,600; Charanjit's Share—₹ 15,000.]
[Hint: The Gross fee of₹ 16,000 earned by Baljit for the firm is less than the amount guaranteed
by him. So the deficiency of ₹ 9,000 (i.e., ₹ 25,000 - ₹ 16,000) will be debited to Baljit's Capital
Account and credited to Profit & Loss Appropriation Account.]
88. (Minimum Earning Guaranteed by a partner to the firm and minimum profit guaranteed by
the firm to a partner).
Jay, Vijay and Karan were partners of an architect firm sharing profits in the ratio of ₹ : ₹ : 1.
Their Partnership Deed provided the following:
(i) A monthly salary of ₹ 15,000 each to Jay and Vijay.
(ii) Karan was guaranteed a profit of ₹ 5,00,000 and Jay guaranteed that he will earn an annual
fee of ₹ 2,00,000. Any deficiency arising because of guarantee to Karan will be borne by Jay
and Vijay in the ratio of 3 : 2.
During the year ended 31st March, 2018, Jay earned fee of ₹ 1,75,000 and the profits of the
firm amounted to ₹ 15,00,000.
Showing your workings clearly prepare Profit & Loss Appropriation Account and the Capital
Accounts of Jay, Vijay and Karan for the year ended 31st March, 2018. (CBSE 2019)
 GOODWILL
Average Profit Method
1. Goodwill is to be valued at three years' purchase of four years' average profit. Profits of the
firm for last four years ending 31st March, were:
2020—₹ 12,000; 2021—₹ 18,000; 2022—₹ 16,000; 2023—₹ 14,000.
Calculate amount of Goodwill. [Ans.: Goodwill—₹ 45,000.]
2. Profits for the five years ending 31st March, are as follows:
Year 2019—₹ 4,00,000; Year 2020—₹ 3,98,000; Year 2021—₹ 4,50,000; Year 2022—₹
4,45,000 and Year 2023—₹ 5,00,000.
Calculate goodwill of the firm on the basis of 4 years' purchase of 5 years' average profit.
(NCERT, Modified)
[Ans.: Goodwill—₹ 17,54,400.]
3. Annu, Baby and Chetan are partners in a firm sharing profits and losses equally. They take
Deep into partnership from 1st April, 2023 for 1 /5th share in the future profits. For this purpose,
goodwill is valued at 100% of the average annual profit of the previous three or four years,
whichever is higher.
The annual profits for the purpose of goodwill for the past four years were:
Year Ended Profit (₹)
31st March, 2023 2,88,000;
31st March, 2022 1,81,800;
31st March, 2021 1,87,200;
31st March, 2020 2,53,200.
Calculate the value of goodwill. [Ans.: Goodwill—₹ 2,27,550.]
4. Purav and Purvi are partners in a firm sharing profits and losses in the ratio of 2 :1.They
admit Parv into partnership for 1 /4th share on 1st April, 2023. For this purpose, goodwill is to
be valued at four times the average annual profit of the previous four or five years, whichever
is higher. The agreed profits for goodwill purpose of the past five years ended 31st March,
are:

Year 2019 2020 2021 2022 2023

Profits (₹) 14,000 15,500 10,000 16,000 15,000

Calculate the value of goodwill. [Ans.: Goodwill—₹ 56;500.]

Q. 5 The goodwill of a firm is valued at 4 years’ purchase of average profits of last five years.
The profits of the last five years were :

Year Profit (₹)

2013-14 : 2,00,000

2014-15 : (3,00,000)

2015-16 : 4,50,000 (including an abnormal gain of ₹50,000)

2016-17 : 3,50,000 (after charging an abnormal loss of ₹90,000)

2017-18 : 2,60,000

Calculate the amount of goodwill.

[Ans. Goodwill ₹8,00,000]
6. Asin and Shreyas were partners sharing profits and losses in the ratio of 2 : 1. They admitted
Shyam as a partner for 1/5th share in profits. For this purpose Goodwill of the firm was to be
valued on the basis of three years' purchase of last five years' average profit. Profits for the
last five years ended 31st March, were:

Year 2019 2020 2021 2022 2023

Profits (₹) 1,25,000 1,00,000 1,87,500 (62,500) 1,25,000

Calculate Goodwill of the firm after adjusting the following:

Profit of 2019-20 was calculated after charging ₹ 25,000 for abnormal loss of goods by fire.
[Ans.: Goodwill—₹ 3,00,000.]
7 Madhu and Vidhi are partners sharing profits in the ratio of 3 : 2. They decided to admit
Manu as a partner from 1st April, 2023 on the following terms:
(i) Manu will be given 2/5th share of the profit.
(ii) Goodwill of the firm will be valued at two years' purchase of three years' normal average
profit of the firm. Profits of the previous three years ended 31st March, were:
2023—Profit ₹ 30,000 (after debiting loss of stock by fire ₹ 40,000).
2022—Loss ₹ 80,000 (includes voluntary retirement compensation paid ₹ 1,10,000).
2021—Profit ₹ 1,10,000 (including a gain (profit) of ₹ 30,000 on the sale of fixed assets).
Calculate the value of goodwill. [Ans.: Goodwill—₹ 1,20,000.]
8 Tarang purchased Jyoti's business with effect from 1st April, 2023. Profits shown by Jyoti's
business for the last three financial years ended 31st March, were:
2021 : ₹ 1,00,000 (including an abnormal gain of ₹ 12,500).
2022 : ₹ 1,25,000 (after charging an abnormal loss of ₹ 25,000).
2023 : ₹ 1,12,500 (excluding ₹ 12,500 as insurance premium on firm's property—now to be
insured).
Calculate the value of firm's goodwill on the basis of two years' purchase of the average profit
of the last three years. [Ans.: Goodwill—₹ 2,25,000.]
9. 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:
2021— Profit ₹ 50,000 (including profit on sale of assets ₹ 5,000).
2022— Loss ₹ 20,000 (including loss by fire ₹ 30,000).
2023— 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.
 [Ans.: Goodwill—₹ 66,000; Kanika shall bring I/4th of ₹ 66,000, i.e., ₹ 16,500 as Goodwill]

Q. 10 X purchased the business of Y from 1st April, 2023. For this purpose goodwill is to be
valued at 100% of the average annual profits of the last four years. The profits shown by Fs
business for the last four years were :

Year ended (₹)

31 st March, 2020 Profit 1,00,000 (after debiting loss of stock by fire

₹50,000)

” 2021 Loss 1,50,000 (includes voluntary retirement

compensation paid ₹80,000)

” 2022 Profit 1,50,000

” 2023 Profit 2,00,000

Verification of books of accounts revealed the following :

(i) During the year ended 31 st March, 2021, a machine got destroyed in accident and ₹60,000
was written off as loss in Profit & Loss Account.
(ii) On 1st July 2021, Two Computers costing ₹40,000 each were purchased and were debited
to Travelling Expenses Account on which depreciation is to be charged @ 10% p.a. on Straight
Line Method.
Calculate the value of goodwill.
[Ans. Goodwill ₹ 1,39,000.]
Hint. Profit for the year ended 31st March 2022 ₹2,24,000 and for 2023 ₹1,92,000.
11. Abhay, Babu and Charu are partners sharing profits and losses equally. They agree to
admit Daman for equal share of profit. For this purpose, the value of goodwill is to be calculated
on the basis of four years' purchase of average profit of last five years. These profits for the
year ended 31st March, were:

Year 2019 2020 2021 2022 2023

Profits/Loss (₹) 1,50,000 3,50,000 5,00,000 7,10,000 (5,90,000)

On 1st April, 2022, a car for ₹ 1,00,000 was purchased and debited to Travelling Expenses
Account, on which depreciation is to be charged @ 25% p.a. Interest of ₹ 10,000 on Non-trade
Investments is credit to Income for the year ended 31st March, 2022 and 2023.
Calculate the value of goodwill after adjusting the above. [Ans.: Goodwill—₹ 9,40,000.]
12. Sumit purchased Amit's business on 1st April, 2023. Goodwill was decided to be valued
at two years' purchase of average normal profit of last four years. The profits for the past four
years were:

Year Ended 31st March, 2020 31st March, 2021 31st March, 2022 31st March, 2023

Profits (₹) 80,000 1,45,000 1,60,000 2,00,000

Books of Account revealed that:
(i) Abnormal loss of ₹ 20,000 was debited to Profit and Loss Account for the year ended 31 st
March, 2020.
(ii) A fixed asset was sold in the year ended 31st March, 2021 and gain (profit) of₹ 25,000 was
credited to Profit & Loss Account.
(iii) In the year ended 31st March, 2022 assets of the firm were not insured due to oversight.
Insurance premium not paid was ₹ 15,000.
Calculate the value of goodwill. [Ans.: Goodwill—₹ 2,82,500.]
Super Profit Method :
Q. 13. A firm earned profits of ₹ 80,000, ₹ 1,00,000, ₹ 1,20,000 and ₹ 1,80,000 during 2010-
11, 2011-12, 2012-13 and 2013-14 respectively. The firm has capital investment of ₹5,00,000.
A fair rate of return on investment is 15% p.a. Calculate goodwill of the firm based on three
years’ purchase of average super profits of last four years. (C.B.S.E. Sample Question Paper,
2015)
[Ans. Goodwill ₹ 1,35,000]
Q. 14 Capital invested in a firm is ₹3,00,000. Normal rate of return is 10%. Average profits of
the firm are ₹41,000 (after an abnormal loss of ₹2,000). Calculate goodwill at five times the
super profits.
[Ans. Goodwill ₹65,000.]
Q. 15 The capital of the firm of Anuj and Benu is ₹ 10,00,000 and the market rate of interest
is 15%. Annual salary to the partners is f60,000 each. The profit for the last three years were
₹2,80,000, ₹3,80,000 and ₹4,20,000. Goodwill of the firm is to be valued on the basis of two
years purchase of last three years average super profits. Calculate the goodwill of the firm.
(C.B.S.E. 2019, M.P.)
[Ans. Goodwill ₹1,80,000]
Q. 16 Find out the capital employed from the following information :

Normal rate of return : 12%

Profits: 2017-18 ₹ 80,000

2018-19 ₹ 1,30,000

2019-20 ₹ 1,56,000

Goodwill valued at 3 years purchase of Super Profits ₹ 1,50,000

[Ans. Capital Employed ₹6,00,000]

1
Q. 17 .A and B are partners. They admit C for 4th share in profits. For this purpose
goodwill is to be valued at three year’s purchase of super profits. Following information is
provided to you :

A’s Capital 5,00,000

B’s Capital 4,00,000

General Reserve 1,50,000

Profit & Loss A/c (Cr.) 30,000

Sundry Assets 12,00,000

The normal rate of return is 15% p.a. Average Profits are ₹2,00,000 per year. You are required
to calculate C’s share of goodwill.
[Ans. C’s share of goodwill ₹28,500.]
Hint. Sundry Assets will be ignored.
18 Atul and Bipul had a firm in which they had invested ₹ 50,000. On an average, the profits
were ₹ 16,000. The normal rate of return in the industry is 15%. Goodwill is to be valued at
four years' purchase of profits in excess of profits @15% on the money invested. Calculate
the value of goodwill. [Ans.: Goodwill—₹ 34,000.]
19. Total capital of the firm of Sakshi, Mehak and Megha is ₹ 1,00,000 and the market rate of
interest is 15%. The net profits for the last 3 years were ₹ 30,000; ₹ 36,000 and ₹ 42,000.
Goodwill is to be valued at 2 years' purchase of the last 3 years' super profit. Calculate the
goodwill of the firm. (Delhi 2017 Q [Ans.: Goodwill—₹ 42,000.]
20 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 2 years' purchase of super profit.
(Delhi 2014 C)
[Ans.: Net Assets = ₹ 22,00,000 - ₹ 5,60,000 = ₹ 16,40,000; Normal Profit—₹ 1,64,000;
Super profit—₹ 6,36,000; Goodwill—₹ 15,90,000.]
21 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.
[Ans.: Goodwill—₹ 20,000.]
Q. 22 The average profit earned by a firm is ₹75,000 which includes undervaluation of stock
of ₹5,000 on an average basis. The capital invested in the business is ₹7,00,000 and the
normal rate of return is 7%. Calculate goodwill of the firm on the basis of 5 times the super
profit.
[Ans. Adjusted Profit ₹80,000; Goodwill ₹ 1,55,000.]
1
Q. 23. Calculate the value of goodwill as on 1st April, 2023, on the basis of 22 year’s purchase
of the average profits of the last five years. The profits and losses for the years ending 31st
March were: 2016 ₹80,000; 2017 ₹1,00,000; 2018 Loss ₹30,000; 2019 ₹ 1,70,000; 2020 ₹
1,60,000 and 2021 ₹1,80,000. You are informed that the profits of the year ending 31st March
2020 included profit on sale of a fixed asset amounting to ₹50,000 and the profits for the year
2021 were effected by a loss due to lire amounting to ₹20,000.
[Ans. ₹2,75,000.]
Hint. Profit for the year 2016 will be ignored.
Q. 24. Calculate the value of goodwill at 2 year’s purchase of the average profits of the last 3
years. The profit for the first year was ₹50,000, for second year twice the profit of first year
and for the third year one and half times the profit of the second year.
[Ans. ₹2,00,000]
Q. 25 A firm earns a profit of ₹37,000 per year. In the same business a 10% return is generally
expected. The total assets of the firm are ₹4,00,000. The value of other liabilities is ₹90,000.
Find out the value of goodwill.
[Ans. Goodwill ₹60,000.]

26. A partnership firm earned net profits during the last three years ended 31st March, as
follows:
2021—₹ 17,000; 2022—₹ 20,000; 2023—₹ 23,000.
Capital investment in the firm throughout the above-mentioned period has been ₹ 80,000.
Having regard to the risk involved, 15% is considered to be a fair return on the capital.
Calculate Value of goodwill on the basis of two years' purchase of average super profit earned
during the above-mentioned three years.
[Ans.: Goodwill—₹ 16,000.]
27 On 1st April, 2023, an existing firm had assets of ₹ 75,000 including cash of ₹ 5,000. Its
creditors amounted to ₹ 5,000 on that date. The firm had a Reserve of ₹ 10,000 while Partners'
Capital Accounts showed a balance of ₹ 60,000. If Normal Rate of Return is 20% and goodwill
of the firm is valued at ₹ 24,000 at four years' purchase of super profit, find average profit per
year of the existing firm.
[Ans.: Capital Employed—₹ 70,000; Normal Profit—₹ 14,000; Super Profit—₹ 6,000;
Average Profit = Normal Profit + Super Profit = ₹ 20,000.]
Q.28 On 1st April, 2022, a firm had assets of ₹ 1,00,000 excluding stock of ₹20,000. Partners’
Capital Accounts showed a balance of ₹60,000. The current liabilities were ₹ 10,000 and the
balance constituted the reserve. If the normal rate of return is 8%, the ‘Goodwill’ of the firm is
valued at ₹60,000 at four years purchase of super profit, find the average profit of the firm.
[Ans. Average Profit ₹23,800.]
Hint: Capital Employed = Total Assets - Current Liabilities
= ₹1,20,000 - ₹10,000 = ₹1,10,000
Q. 29. On April 1st 2020, an existing firm had assets of ₹5,00,000 including cash of ₹20,000.
the firm had a General Reserve of ₹90,000, partner’s capital accounts showed a balance of
₹3,80,000 and creditors amounted to ₹30,000. If the normal rate of return is 20% and the
goodwill of the firm is valued at ₹ 64,000 at 4 year’s purchase of super profit, find the average
profits of the firm.
[Ans. ₹ 1,10,000.]
Q. 30 An existing firm had assets of ₹4,00,000 including cash of ₹ 15,000. The partner’s capital
accounts showed a balance of ₹3,'00,000 and reserves constituted the rest. If the normal rate
1
of return is 12% and the goodwill of the firm is valued at ₹50,000 at 2 2 year’s purchase of
super profits, find the average profits of the firm.
[Ans. ₹68,000]
Q. 31 An existing firm had assets of ₹4,00,000 including cash of ₹ 15,000. Its creditors
amounted to ₹20,000 on that date. The partner’s capital accounts showed a balance of
₹3,00,000 and reserves amounted to ₹80,000. If the normal rate of return is 10% and the
goodwill of the firm is valued at ₹75,000 at 3 year’s purchase of super profits, find the average
profits of the firm.
[Ans. ₹63,000.]

32. 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. [Ans.: Capital Employed—₹ 13,75,000.]
Capitalisation Method
33 From the following information, calculate value of goodwill of the firm by applying
Capitalisation Method:
Total Capital of the firm ₹ 16,00,000.
Normal rate of return 10%.
Profit for the year ₹ 2,00,000. [Ans.: Goodwill—₹ 4,00,000.]
34 A firm earned average profit of ₹ 3,00,000 during the last few years. The normal rate of
return of the industry is 15%. The assets of the business were ₹ 17,00,000 and its liabilities
were ₹ 2,00,000.
Calculate the goodwill of the firm by capitalisation of average profit. (CBSE 2019)
[Ans.: Goodwill—₹ 5,00,000.]
35 A and 6 were partners in a firm with capitals of ₹ 3,00,000 and ₹ 2,00,000 respectively. The
normal rate of return was 20% and the capitalised value of average profits was ₹ 7,50,000.
Calculate goodwill of the firm by capitalisation of average profits method. (CBSE2020 C)
[Ans.: Goodwill—₹ 2,50,000.]
[Hint: Goodwill = Capitalised Value of Average Profit - Capital Employed.]
36 Puneet and Tarun are in restaurant business having credit balances in their fixed Capital
Accounts as ₹ 2,50,000 each. They have credit balances in their Current Accounts of ₹ 30,000
and ₹ 20,000 respectively. The firm does not have any liability. They are regularly earning
profits and their average profit of last 5 years is ₹ 1,00,000. If the normal rate of return is 10%,
find the value of goodwill by Capitalisation of Average Profit Method.
[Ans.: Goodwill—₹ 4,50,000.]
37. From the following particulars, calculate value of goodwill of a firm by Capitalisation of
Average Profit Method:
(i) Profits of last five consecutive years ending 31 st March, are:
2023—₹ 54,000; 2022—₹ 42,000; 2021—₹ 39,000; 2020—₹ 67,000 and 2019—₹ 59,000.
(ii) Capitalisation rate 20%.
(iii) Net assets of the firm₹ 2,00,000. [Ans .: Goodwill—₹ 61,000.]
38. A business has earned average profit of ₹ 4,00,000 during the last few years and the
normal rate of return in similar business is 10%. Find value of goodwill by:
(i) Capitalisation of Super Profit Method, and
(ii) Super Profit Method if the goodwill is valued at 3 years' purchase of super profits.
Assets of the business were ₹ 40,00,000 and its external liabilities ₹ 7,20,000. (Delhi 2013 C)
[Ans.: (i) Goodwill—₹ 7,20,000; (ii) Goodwill—₹ 2,16,000.]
39. 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.
[Ans.: Goodwill—₹ 9,00,000 in both cases.]
40. 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. (CBSE Sample Paper 2018)
[Ans.: Capital Employed—₹ 1,10,000; Normal Profit—₹ 8,800; Average Actual Profit
— ₹ 23,800.]
[Hint: ₹ 60,000 (Goodwill) = 4 (Average Actual Profit - Normal Profit).]
Capitalisation of Super Profit
41. Average profit of a firm during the last few years is ₹ 1,50,000. In similar business, the
normal rate of return is 10% of the capital employed. Calculate the value of goodwill by
capitalisation of super profit method if super profits of the firm are ₹ 50,000. (CBSE 2020 C)
[Ans.: Goodwill—₹ 5,00,000.]
42. Raja Brothers earn an average profit of ₹ 30,000 with a capital of ₹ 2,00,000. The normal
rate of return in the business is 10%. Using capitalisation of super profit method, workout the
value of the goodwill of the firm. (NCERT)
[Ans.: Goodwill—₹ 1,00,000.]
43. Rajan and Rajani are partners in a firm. Their capitals were Rajan ₹ 3,00,000; Rajani ₹
2,00,000. During the year ended 31st March, 2023, the firm earned a profit of₹ 1,50,000.
Calculate the value of goodwill of the firm by capitalisation of super profit assuming that the
normal rate of return is 20%.
(NCERT, Modified)
[Ans.: Goodwill—₹ 2,50,000.]
44. Average profit of GS & Co. is ₹ 50,000 per year. Average capital employed in the business
is ₹ 3,00,000. If the normal rate of return on capital employed is 10%, calculate goodwill of the
firm by:
(i) Super Profit Method at three years' purchase; and
(ii) Capitalisation of Super Profit Method. [Ans.: Goodwill—(i) ₹ 60,000; (ii) ₹ 2,00,000.]
45.. The average profits of a firm is ₹48,000. The total assets of the firm are ₹ 8,00,000. Value
of other liabilities is ₹ 5,00,000. Average rate of return in the same business is 12%.
Calculate goodwill from capitalisation of average profits method.
[Ans. ₹ 1,00,000.]
Hint: Capital Employed = Assets - Liabilities.
46. Anupma, Pumima and Ruchika are partners in a business. Balances in their Capital and
Current Accounts as on 31st March, 2023 were :

Capital Account Current Account

 (₹) (₹)

Anupma 6,00,000 60,000 (Dr.)

Pumima 5,00,000 30,000 (Dr.)

Ruchika 5,00,000 10,000 (Cr.)

The firm earned an average profit of ₹2,40,000. If the normal rate of return is 12%, find the
value of goodwill by Capitalisation of Average Profit Method.
[Ans. Value of Goodwill ₹4,80,000]

47.. A business has earned average profit of ₹ 8,00,000 during the last few years and the(
normal rate of return in similar business is 10%. Find value of goodwill by:
(i) Capitalisation of Super Profit Method; and
(ii) Super Profit Method if the goodwill is valued at 3 years' purchase of super profit.
Assets of the business were ₹ 80,00,000 and its external liabilities ₹ 14,40,000.
[Ans.: Goodwill— (i) ₹ 14,40,000; (ii) ₹ 4,32,000.]

Weighted Average Profit Method

48. Profits of a firm for the year ended 31st March for the last five years were:

Year Ended 31st March, 31st March, 31st March, 31st March, 31st March,
2019 2020 2021 2022 2023

Profits (₹) 20,000 24,000 30,000 25,000 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,
2019, 2020, 2021, 2022 and 2023. [Ans.: Goodwill—₹ 69,600.]
49. Raman and Daman are partners sharing profits in the ratio of 60 : 40 and for the last four
years they have been getting annual salaries of₹ 50,000 and ₹ 40,000 respectively. The
annual accounts have shown the following net profit before charging partners' salaries:
Year ended 31st March, 2021—₹ 1,40,000; 2022—₹ 1,01,000 and 2023—₹ 1,30,000.
On 1st April, 2023, Zeenu is admitted to the partnership for 1 /4th share in profit
(without any salary). Goodwill is to be valued at four years' purchase of weighted average
profit of last three years (after partners' salaries); Profits to be weighted as 1, 2 and 3, the
greatest weight being given to the last year Calculate the value of Goodwill. [Ans.:
Goodwill—₹ 1,28,000.]
50 The profits earned by a firm during the last four years were as follows :

Year ended 31st March Profits (₹)

2018 80,000

2019 1,00,000
 2020 1,10,000

2021 1,50,000

Calculate the value of goodwill on the basis of three year’s purchase of weighted average
profits. Weights to be used are 1,2, 3 and 4 respectively to the profits for 2018, 2019, 2020
and 2021.
[Ans. Goodwill ₹3,63,000.]
Q. 51 Following information is available about the business of a firm :
(i) Profits : In 2019, ₹40,000; In 2020, ₹50,000; In 2021, ₹60,000, (ii) Nonrecurring income of
₹ 1,000 is included in the profits of 2020, (iii) Profits of 2019 have been reduced by ₹ 6,000
because goods were destroyed by fire, (iv) Goods have not been insured but it is thought to
insure them in future. The insurance premium is estimated at ₹400 per year, (v) Reasonable
remuneration of the proprietor of business is ₹6,000 per year, but it has not been taken into
account for calculation of above mentioned profits, (vi) Profits of 2021 include ₹5,000 income
on investment.
Goodwill is agreed to be valued at two year’s purchase of the weighted average profits of the
past three years. The appropriate weights to be used are :—
2019: —1; 2020 : — 2; 2021: — 3.
[Ans. Value of Goodwill ₹90,200.]
Q. 52. Calculate the value of goodwill on the basis of three year’s purchase of the weighted
average profits of the last five years. Profits to be weighted 1, 2, 3, 4 and 5, the greatest
weightage to be given to last year. Profits of the last five years were :

Year ended (₹)

31st March, 2019 : Profit 80,000

” 2020 : Profit 1,05,000 (after considering abnormal loss of

₹41,500)

” 2021 : Loss (after considering abnormal gain of

20,000
₹40,000)

” 2022: Profit 1,80,000

” 2023 : Profit 2,00,000

Books of Accounts of the firm revealed that:

(i) Closing Stock as on 31st March, 2019 was overvalued by ₹40,000.
(ii) Repairs to Machinery ₹60,000 were wrongly debited to Machinery Account on 1st July,
2021. Depreciation was charged on Machinery @ 20% p.a. on diminishing balance method.
[Ans. Value of Goodwill ₹3,60,000.]
Hint Weighted Profit for the year ended 31st March 2022 ₹5,16,000 and 2023 ₹10,51,000.

Q. 53. The following information relates to a partnership firm :

(a) Profits/Losses for the last six years :
1st year ₹20,000 Profit 4th year ₹60,000 Profit

2nd year ₹60,000 Profit 5th year ₹50,000 Profit

3rd year ₹ 10,000 Loss 6th year ₹72,000 Profit

(b) Average Capital Employed is ₹2,00,000.

(c) Rate of normal profit is 15%.
Find out the value of goodwill on the basis of:
(i) Four year’s purchase of average profits.
(ii) Four year’s purchase of super profits.
(iii) Capitalisation of super profits.

[Ans. (i) On the basis of average profits , ₹ 1,68,000

(ii) On the basis of super profits ₹ 48,000

(iii) On the basis of capitalisation of super profits ₹ 80,000.]

54. From the following information, calculate value of goodwill of the firm:
(i) At three years' purchase of Average Profit.
(ii) At three years' purchase of Super Profit.
(iii) On the basis of Capitalisation of Super Profit.
(iv) On the basis of Capitalisation of Average Profit.
Information:
(a) Average Capital Employed is ₹ 6,00,000.
(b) Net Profit/(Loss) of the firm for the last three years ended are:
31st March, 2023—₹ 2,00,000, 31st March, 2022—₹ 1,80,000, and 31st March, 2021—₹
1,60,000.
(c) Normal Rate of Return in similar business is 10%.
(d) Remuneration of₹ 1,00,000 to partners is to betaken as charge against profit.
(e) Assets of the firm (excluding goodwill, fictitious assets and non-trade investments) is ₹
7,00,000 whereas Partners' Capital is ₹ 6,00,000 and Outside Liabilities ₹ 1,00,000.
[Ans.: Goodwill—(i) ₹ 2,40,000; (ii) ₹ 60,000; (iii) ₹ 2,00,000; (iv) ₹ 2,00,000.]
Q. 54. The following information relates to a partnership firm :
(a) Sundry Assets of the firm ₹6,80,000. Outside Liabilities ₹60,000.
(b) Profits and losses for the past years : Profit 2018 ₹50,000; Loss 2019 ₹ 10,000; Profit 2020
₹ 1,64,000 and Profit 2021 ₹1,80,000.
(c) The normal rate of return in a similar type of business is 12%.
Calculate the value of goodwill on the basis of:
(i) Three year’s purchase of average profits.
(ii) Three year’s purchase of super profits.
(iii) Capitalisation of average profits, and
(iv) Capitalisation of super profits.
[Ans. (i) ₹2,88,000; (ii) ₹ 64,800; (iii) ₹ 1,80,000 and (iv) ₹ 1,80,000]
 CHANGE IN PROFIT SHARING RATIO.
Accounting Treatment of Goodwill when there is change in the profit sharing ratio of
existing partners
1 .Asha, Nisha and Disha shared profits and losses in the ratio of 3 : 2 : 1 respectively. With
effect from 1st April, 2023, they agreed to share profits equally. The goodwill of the firm was
valued at ₹ 18,000.
Pass necessary Journal entries to record the above change.
[Ans.: Dr. Disha's Capital A/c and Cr. Asha's Capital A/c by ₹ 3,000.]
2. X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. From 1st April,
2023, they decided to share profits and losses equally. The Partnership Deed provides that in
the event of any change in the profit-sharing ratio, goodwill is to be valued at two years'
purchase of the average profit of the preceding five years. The profits and losses of the
preceding years ended 31st March, are:

Year 2019 2020 2021 2022 2023

Profits (₹) 70,000 75,000 55,000 35,000 10,000 (Loss)

Calculate the value of goodwill and pass Journal entry.

[Ans.: Goodwill = ₹ 90,000; Dr. Y's Capital A/c by ₹ 3,000 and Z’s Capital A/c by ₹ 12,000;
Cr. X's Capital A/c by ₹ 15,000.]
3. Ram, Laxman and Bharat who were sharing profits and losses in the ratio of 5 : 3 : 2, decide
to share profits and losses equally with effect from 1st April, 2023. Goodwill of the firm is
valued at ₹ 4,50,000. Goodwill is appearing in the books is at ₹ 75,000.
Pass necessary Journal entries to record the above change.
[Ans.: For Goodwill Written off—Dr. Ram's Capital A/c by ₹ 37,500; Laxman's Capital A/c by
₹ 22,500;
Bharat's Capital A/c by ₹ 15,000 and Cr. Goodwill A/c by ₹ 75,000.
For Adjustment of Goodwill—Dr. Laxman's Capital A/c by ₹ 15,000; Bharat's Capital A/c by ₹
60,000
and Cr. Ram's Capital A/c by ₹ 75,000.]
4. A and B are partners in a firm sharing profits in the ratio of 2 : 1. They decided that with
effect from 1st April, 2022, they would share profits in the ratio of 3; 2. But, this decision was
taken after the profit for the year ended 31st March, 2023 of ? 90,000 was distributed in the
old profit-sharing ratio.
Firm's goodwill was valued on the basis of aggregate of two years' profits preceding the date
decision became effective.
Profits for the years ended 31st March, 2021 and 2022 were ₹ 60,000 and ₹ 75,000
respectively. Capital Accounts of the partners as at 31st March, 2023 stood at ₹ 1,50,000 for
A and ₹ 90,000 for B.
Pass necessary Journal entries and prepare Partners' Capital Accounts.
[Ans.: Value of Goodwill— ₹1,35,000; A's sacrifice—1/15 and B's Gain—1/15;
For Adjustment of Profit: Dr. A's Capital A/c and Cr. B's Capital A/c by ₹ 6,000.
For Adjustment of Goodwill: Dr. B's Capital A/c and Cr. A's Capital A/c by ₹ 9,000.
 Balances of: A's Capital A/c—₹ 1,53,000; B's Capital A/c—₹ 87,000.]
Q. 5. A and B are partners sharing profits and losses in the ratio of 3 : 1. It was decided that
with effect from 1st April, 2021 the profit sharing ratio will be 5 : 3. Goodwill is to be valued at
2 year’s purchase of average of 3 year’s profits. The profits for the years ending 31st March
2019, 2020 and 2021 were ₹36,000, ₹32,000 and ₹40,000 respectively.
Pass the necessary journal entry for the treatment of goodwill.
[Ans. Debit B by ₹9,000 and Credits by ₹9,000.]
Q.6. P, Q and R are partners sharing profits equally. They decided that in future R will get 1/7
share in profits. On the day of change, firm’s Goodwill is valued at ₹42,000. Give Journal
Entries arising on account of change in profit sharing ratio.
[Ans. Debit P and Q by ₹4,000 each and credit R by ₹8,000.]
3 3 1 2 4
Hint.: New Ratios 7 : 7 : 7. P and Q gain 21 each and R sacrifices 21.
Q.7. A, B and C were partners sharing profits and losses in the ratio of 7 : 3 : 2. From 1st April
2021, they decided to share profits and losses in the ratio of 8 : 4 : 3. Goodwill is to be valued
at the average of three year’s profits preceding the date of change in profit sharing ratio. The
profits for the years ending 31 st March 2018,2019, 2020 and 2021 were ₹52,000, ₹48,000,
₹60,000 and ₹90,000 respectively. Give the necessary journal entries when goodwill is raised
and written off.
[Ans. Value of Goodwill ₹66,000; (i) Dr. Goodwill A/c by ₹66,000 and Credit A, B and C in 7 :
3 : 2, (ii) Dr. A, B and C in 8 : 4 : 3 and Credit Goodwill A/c by ₹66,000. |
Accounting Treatment of Reserves and Accumulated Profits when there is change in
the profit sharing ratio of existing partners
Q. 8. A and B are partners in a firm sharing profits in the ratio of 3 : 2. They decided to share
profits in the ratio of 3 : 4 w.e.f., April 1,2021. On that date there was a credit balance of ₹
70,000 in their Profit and Loss Account. Pass the necessary journal entry assuming that
partners decide to distribute the profits.
[Ans. Credit A’s Capital A/c by ₹42,000 and B’s Capital A/c by ₹28,000.]
Q. 9. A, B and C are partners sharing profits and losses in the ratio of 1 : 2 : 3. From April 1,
2021, they decided to share the profits in the ratio of 2 : 3 : 4. On that date, Profit and Loss
Account disclosed a debit balance of ₹ 90,000. Record the necessary journal entry for the
distribution of the balance in the Profit and Loss Account.
[Ans. Debit A's Capital A/c by ₹ 15,000, B’s Capital A/c by ₹30,000 and C’s Capital A/c by
₹45,000.]
Q.9 (B). A, B and C are partners sharing profits equally. From 1st April, 2022, they decided to
share profits in the ratio of 3 : 4 : 5. On that date, Profit and Loss Account showed a credit
balance of ₹90,000. Partners do not want to distribute the Profit and Loss Account balance
but prefer to record the change by an adjustment entry. You are required to give the adjusting
entry.
[Ans. Debit C and Credit A by ₹7,500.]

10. Nitya and Anand are partners in a firm sharing profits and losses equally. With effect from
1st April, 2023, they decided to share future profits in the ratio of 3 : 2. On the date of change
in the profit-sharing ratio, the Profit & Loss Account had a credit balance of ₹ 1,50,000. Pass
the necessary Journal entry for the distribution of the balance in the Profit & Loss Account
before the change in the profit-sharing ratio.
[Ans.: Dr. Profit & Loss A/c by ₹ 1,50,000; Cr. Nitya's Capital A/c by ₹ 75,000 and
 Anand's Capital A/c by ₹ 75,000.]
11. Om and Shiv are partners in a firm sharing profits in the ratio of 4 : 1.They decided to
share future profits in the ratio of 3 : 2 w.e.f. 1st April, 2023. On that day, Profit & Loss Account
showed a debit balance of ₹ 1,00,000. Pass Journal entry to give effect to the above.
[Ans.: Dr. Om's Capital A/c by ₹ 80,000 and Shiv's Capital A/c by ₹ 20,000; Cr. Profit & Loss
A/c by ₹ 1,00,000.]
12. Amar and Akbar are partners sharing profits in the ratio of 2 :1. On 31st March, 2023, 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:
(i) When General Reserve is not to be shown in the new Balance Sheet.
(ii) When General Reserve is to be shown in the new Balance Sheet.
[Ans.: (i) Dr. General Reserve A/c by ₹ 60,000; Cr. Amar's Capital A/c by ₹ 40,000 (i.e., 2/3
of ₹ 60,000);
and Akbar's Capital A/c by ₹ 20,000 (i.e., 1/3 of ₹ 60,000).
(ii) Amar's Sacrifice—1/15; Akbar's Gain—1/15; Dr. Akbar's Capital A/c by ₹ 4,000
(i.e., 1/15 of₹ 60,000) and Cr. Amar's Capital A/c by ₹ 4,000.]
Q. 30. A and B are partners in a firm sharing profits in the ratio of 3 : 2. On March 31, 2021,
their Balance Sheet showed a general reserve of ₹54,000. On that date they decided to admit
C as a new partner. The new profit sharing ratio between A, B and C will be 4 : 3 : 2. Record
the necessary journal entry in the books of the firm under the following circumstances :
(i) When they want to transfer the general reserve in their capital accounts.
(ii) When they don’t want to transfer general reserve in their capital accounts and prefer to
record an adjustment entry for the same.
[Ans. (i) Dr. General Reserve by ₹ 54,000
Cr. A’s Capital A/c by ₹32,400
Cr. B’s Capital A/c by ₹21,600
(ii) Dr. C’s Capital A/c by ₹ 12,000
Cr. A’s Capital A/c by₹ 8,400
Cr. B's Capital A/c by₹ 3,600]

13. Mita, Gopal and Farhan were partners sharing profits and losses in the ratio 3 : 2 : 1. On
31st March, 2018 they decided to change the profit-sharing ratio to 5 : 3 : 2. On this date, the
Balance Sheet showed Deferred Advertisement Expenditure ₹ 30,000 and Contingency
Reserve ₹ 9,000.
Goodwill was valued at ₹ 4,80,000. Pass the necessary Journal entries for the above
transactions in the books of the firm on its reconstitution. (CBSE 2019)
[Ans.: (i) Dr. Mita's Capital A/c by ₹ 15,000; Gopal's Capital A/c by ₹ 10,000 and
Farhan's Capital A/c by ₹ 5,000; Cr. Deferred Advertisement Expenditure A/c by ₹ 30,000.
(ii) Dr. Contingency Reserve A/c by ₹ 9,000; Cr. Mita's Capital A/c by ₹ 4,500;
Gopal's Capital A/c by ₹ 3,000 and Farhan's Capital A/c by ₹ 1,500.
(iii) For Goodwill: Dr. Farhan's Capital A/c and Cr. Gopal's Capital A/c by ₹ 16,000.]
14.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 with effect from 1st April, 2023. They also decide to
record the effect of the following accumulated profits, losses and reserves without affecting
their book values by passing a single entry.
Book Values (₹)
General Reserve 6,000
Profit & Loss A/c (Credit) 24,000
Advertisement Suspense A/c 12,000
Pass an Adjustment Entry. [Ans.: Dr. Z's Capital A/c and Cr. X's Capital A/c by ₹ 5,400.]
Q.15.. X Y and Z were sharing profits and losses in the ratio of 5 : 3 : 2. They decided to share
future profits and losses in the ratio of 2 : 3 : 5 with effect from 1.4.2022. They decided to
record the effect of the following, without effecting their book values :—
(i) Profit and Loss Account ₹24,000
(ii) Advertisement Suspense Account ₹ 12,000
Pass the necessary adjusting entry.
[Ans. Debit Z by ₹3,600 and Credit X by ₹3,600.]
Q. 16. A, B, C and D are partners in a firm sharing profits and losses in the ratio of 2 :2 : 1 : 1.
They decided to share future profits and losses in the ratio of 3 : 2 : 2 : 3. For this puipose
goodwill of the firm valued at ₹1,50,000. There was also a reserve of ₹60,000 in the books of
the firm.
Find out sacrifice ratio and gaining ratio and pass necessary journal entry assuming that
reserve is not to be distributed.
[Ans. Debit C by ₹7,000 and D by ₹28,000; Credit A by ₹7,000 and B by ₹28,000.]
Q. 17. Arun and Varim were in partnership sharing profits in the ratio of 2 : 3. With effect from
1 st May 2021 they agreed to share profits in the ratio of 1 : 2. For this purpose the goodwill
of the firm is to be valued at two year’s purchase of the average profits of last three years,
which were ₹ 1,50,000, ₹ 1,40,000 and ₹2,20,000 respectively. Reserves appear in the books
at ₹ 1,10,000. Partners do not want to distribute the reserves. You are required to give effect
to the change by passing a single journal entry.
[Ans. Debit Varun and Credit Arun by ₹30,000.]
Q. 18 X Y and Z are partners sharing profits and losses in the ratio of 7 : 5 : 4. Their balance
sheet as at 31 st March 2021 stood as follows :

Liabilities ₹ Assets ₹

Capital Accounts : Sundry Assets 6,00,000

X 2,00,000

Y 1,50,000

Z 1,20,000 4,70,000

General Reserve 75,000

Profit & Loss A/c (Profits) 15,000

Creditors 40,000

6,00,000 6,00,000

Partners decided that with effect from 1st April 2021, they will share profits and losses in the
ratio of 3 : 2 : 1. For this purpose goodwill of the firm was valued at ₹ 1,50,000. The partners
do not want to distribute the general reserve and profits.
Pass a single journal entry to record the change and prepare a revised balance sheet.
[Ans. Debit X by ₹ 15,000 and Y by ₹5,000; Credit Z by ₹20,000. Total of Balance Sheet
₹6,00,000.]
Revaluation of Assets and Reassessment of Liabilities
19.. Ashish, Aakash and Amit are partners sharing profits and losses equally. The Balance
Sheet as at 31st March, 2023 was as follows:

Liabilities ₹ Assets ₹

Sundry Creditors 1,35,000 Cash in Fland 84,000

General Reserve 90,000 Cash at Bank 1,40,000

Capital A/cs: Sundry Debtors 80,000

Ashish 3,00,000 Stock 1,40,000

Aakash 3,00,000 Land and Building 4,00,000

Amit 2,75,000 8,75,000 Machinery 2,50,000

Advertisement Suspense 6,000

11,00,000 11,00,000

The partners decided to share profits in the ratio of 2 : 2 : 1 w.e.f. 1st April, 2023. They also
decided that:
(i) Value of stock to be reduced to ₹ 1,25,000.
(ii) Value of machinery to be decreased by 10%.
(iii) Land and Building to be appreciated by ₹ 62,000.
(iv) Provision for Doubtful Debts to be made @ 5% on Sundry Debtors.
(v) Aakash was to carry out reconstitution of the firm at a remuneration of ₹ 10,000.
Pass necessary Journal entries to give effect to the above.
[Ans.: Revaluation Profit—₹ 8,000]
20.. A, B and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance
Sheet as on 31st March, 2015 was as follows:

Liabilities ₹ Assets ₹

Creditors 50,000 Land 50,000

Bills Payable 20,000 Building 50,000

General Reserve 30,000 Plant 1,00,000

Capital A/cs: Stock 40,000

A 1,00,000 Debtors 30,000

B 50,000 Bank 5,000

C 25,000 1,75,000

2,75,000 2,75,000

From 1st April, 2015, A, B and C decided to share profits equally. For this it was agreed that:
(i) Goodwill of the firm will be valued at ₹ 1,50,000.
(ii) Land will be revalued at ₹ 80,000 and building be depreciated by 6%.
(iii) Creditors of ₹ 6,000 were not likely to be claimed and hence should be written off.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the
reconstituted firm.
(Delhi 2016)
[Ans.: Gain (Profit) on Revaluation—₹ 33,000; Partners' Capital Accounts: A—₹ 1,56,500;
B—₹ 71,000 and C—₹ 10,500; Balance Sheet Total—₹ 3,02,000.]
21. Balance Sheet of X and Y, who share profits and losses as 5 : 3, as at 1st April, 2022 is:

Liabilities ₹ Assets ₹

X's Capital 52,000 Goodwill 8,000

Y's Capital 54,000 Machinery 38,000

General Reserve 4,800 Furniture 15,000

Workmen Compensation Reserve 10,000 Sundry Debtors 33,000

Employees' Provident Fund 1,000 Stock 7,000

Sundry Creditors 5,000 Bank 25,000

Advertisement Suspense A/c 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.
[Ans.: Gain (Profit) on Revaluation—₹ 8,000; Capitals: X—₹ 60,000; Y—₹ 54,000;
Balance Sheet Total—₹ 1,26,000.]
Q. 22. A, B and C are partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance
Sheet as at 31 st March, 2022 is as under :

Liabilities ₹ Assets ₹

Sundry Creditors 2,00,000 Premises 3,00,000

General Reserve 1,20,000 Machinery 1,80,000

Capitals : Stock 1,20,000

A 3,00,000 Debtors 2,50,000

B 1,50,000 Bank 20,000

C 1,00,000 5,50,000

8,70,000 8,70,000

From 1st April, 2022, the partners agreed to share future profits in the ratio of 4:3:3 and make
the following adjustments :
(i) Premises will be appreciated by 10% and stock by 710,000.
(ii) A provision for doubtful debts is to be made on debtors @4%.
(iii) Sundry Creditors be reduced by ₹ 15,000.
(iv) Machinery will be depreciated by 5%.
(v) Goodwill of the firm is valued at ₹48,000.
Prepare Revaluation Account, Partner’s Capital Accounts and Balance Sheet of the
reconstituted firm.
[Ans. Profit on Revaluation ₹36,000; Balance of Capital Accounts : A ₹3,82,800,
B ₹2,03,600 and C ₹1,19,600; Balance Sheet Total ₹8,91,000.]
3 1 4
Hint: A Sacrifices 30, B Sacrifices 30 and C gains 30 th share.
Q. 23. P, Q and R were partners sharing profits in the ratio of 1 : 3 : 2. Following was their
Balance Sheet as at 31 st March, 2022 :

Liabilities ₹ Assets ₹

Sundry Creditors 2,80,000 Land and Building 5,00,000

Outstanding Expenses 15,000 Investments

Workmen Compensation Reserve 60,000 (Market Value ₹ 1,10,000) 1,25,000

Investment Fluctuation Reserve 45,000 Stock 2,20,000

Capital Accounts : Sundry Debtors 3,20,000

P 2,00,000 Bank Balance 1,60,000

Q 5,00,000 Advertisement Suspense 75,000

R 3,00,000 10,00,000

14,00,000 14,00,000

On 1st April, 2022 they decided to share future profits in the ratio of 4 : 6 : 5. It was agreed
that :
(i) Claim for Workmen Compensation has been estimated at ₹ 1,00,000.
(ii) A motor cycle valued at ₹30,000 was unrecorded and is now to be recorded in the books.
(iii) Outstanding expenses were not payable anymore.
(iv) Value of stock be increased to ₹2,90,000.
(v) A provision for doubtful debts be created @ 5% on Sundry Debtors.
(vi) Goodwill is valued at ₹ 1,00,000.
(vii) The work of reconstitution was assigned to firm’s auditors. They were paid ₹20,000 for
this work.
Pass journal entries and prepare Revaluation Account.
|Ans. Gain on Revaluation ₹39,000.]
Q. 24. A, B and C are partners sharing profits and losses in the ratio of 2 : 2 : 1. From 1st April,
2023 they decided to share future profits and losses equally.
Following balances appeared in their books :

Profit and Loss A/c (Cr.) 20,000

Advertisement Suspense A/c (Dr.) 15,000

Workmen Compensation Reserve 60,000

It was agreed that:

(i) Goodwill should be valued at two year’s purchase of super profits. Firm’s average profits
are ₹75,000. Capital invested in the business is ₹6,00,000 and normal rate of return is 10%.
(ii) Furniture (book value of ₹ 50,000) be reduced to ₹30,000.
(iii) Computers (book value of ₹40,000) be reduced by ₹ 10,000.
(iv) Claim on account of Workmen’s Compensation amounted to ₹50,000.
(v) Investments (book value of ₹30,000) were revalued at ₹25,000.
Pass necessary journal entries for the above.
[ Ans. Adjustment for Goodwill : Dr. C by ₹4,000 and Cr. A and B by ₹2,000 each; Revaluation
Loss ₹35,000.]
Q. 25. Asha, Rina and Chahat were partners in a firm sharing profits and losses in the ratio of
2 : 2 : 1. Their Balance Sheet as at 31st March, 2019 was as follows :
 Balance Sheet of Asha, Rina and Chahat as at 31st March, 2019

Liabilities ₹ Assets ₹

Creditors 12,00,000 Plant and Machinery 14,80,000

General Reserve 2,00,000 Stock 2,20,000

Capitals : Sundry Debtors 2,60,000

Asha 3,00,000 Less : Provision for

Rina 2,00,000 doubtful debts 20,000 2,40,000

Chahat 1,00,000 6,00,000 Bank 60,000

20,00,000 20,00,000

Asha, Rina and Chahat decided to share future profits equally with effect from 1 st April, 2019.
For this, it was agreed that:
(i) Goodwill of the firm be valued at ₹ 1,50,000.
(ii) Bad debts amounted to ₹40,000. A provision for doubtful debts was to be made @ 5% on
debtors.
Pass the necessary journal entries to record the above transactions in the books of the firm.
(C.B.S.E. 2020, Rajasthan)
[Ans. Loss on Revaluation ₹31,000; Adjustment for Goodwill : Dr. Chahat by ₹20,000 and Cr.
Asha and Rina by ₹ 10,000 each.]
Q. 26 Aman, Bobby and Chandani were partners in a firm sharing profits and losses in the
ratio of 5 : 4 : 1. From 1st April, 2018 they decided to share profits equally. The revaluation of
assets and re-assessment of liabilities resulted in a loss of ₹5,000. The goodwill of the firm on
its reconstitution was valued at ₹ 1,20,000. The firm had a balance of ₹20,000 in General
Reserve.
Showing your workings clearly pass necessary journal entries on the reconstitution of the firm.
(C.B.S.E. 2019, M.P.)
[Ans. Adjustment for Goodwill : Dr. Chandani by ₹28,000 and Cr. Aman by ₹20,000 and Bobby
by ₹8,000.]
Q. 27. X and Y are partners sharing profits and losses in the ratio of 4 : 3. Their Balance Sheet
as at 31 st March, 2021 stood as follows :

Liabilities ₹ Assets ₹

Sundry Creditors 28,000 Cash 20,000

Reserve 42,000 Sundry Debtors 1,20,000

Capital Accounts : Stock 1,40,000

X 2,40,000 Fixed Assets 1,50,000

Y 1,20,000 3,60,000
 4,30,000 4,30,000

They decided that with effect from 1st April, 2021, they will share profits and losses in the ratio
of 2 : 1. For this purpose they decided that:
(i) Fixed assets are to be depreciated by 10%.
(ii) A provision of 6% be made on debtors for doubtful debts.
(iii) Stock be valued at ₹ 1,90,000.
(iv) An amount of ₹3,700 included in creditors is not likely to be claimed.
Partners decided to record the revised values in the books. However, they do not want to
disturb the reserves. You are required to prepare journal entries, capital accounts of the
partners and the revised balance sheet.
[Ans. Profit on Revaluation ₹31,500; Adjustment for Reserve : Dr. X by ₹4,000 and Cr. Y by
₹4,000; Capitals X ₹2,54,000 and Y ₹ 1,37,500; Balance Sheet Total ₹4,57,800.]
Q. 28 .P, Q and R are in partnership sharing profits and losses in the ratio of 5 : 4 : 3. On 31
st March 2023, their balance sheet was as follows :

Liabilities ₹ Assets ₹

Sundry Creditors 50,000 Cash at Bank 40,000

Outstanding Expenses 5,000 Sundry Debtors 2,10,000

General Reserve 75,000 Stock 3,00,000

Capital Accounts : Furniture 60,000

P 4,00,000 Plant & Machinery 4,20,000

Q 3,00,000

R 2,00,000 9,00,000

10,30,000 10,30,000

It was decided that with effect from 1st April 2023, the profit sharing ratio will be 4:3:2. For this
purpose the following revaluations were made :
(i) Furniture be taken at 80% of its value.
(ii) Stock be appreciated by 20%.
(iii) Plant & Machinery be valued at ₹4,00,000.
(iv) Create provision for doubtful debts for ₹ 10,000 on debtors.
(v) Outstanding expenses be increased by ₹3,000.
Partners agreed that altered values are not to be recorded in the books and they also do not
want to distribute the general reserve.
You are required to post a single journal entry to give effect to the above. Also prepare the
revised Balance Sheet.
[Ans. Profit on Revaluation ₹ 15,000. Adjustment for Revaluation and General Reserve : Debit
P by ₹2,500 and Credit R by ₹2,500. Balance Sheet Total ₹ 10,30,000.]
Q. 29. L, M and N are partners sharing profits and losses in equal proportion. On 31st March
2021, their balance sheet was as follows :

Liabilities ₹ Assets ₹

Sundry Creditors 28,000 Cash 20,000

Reserve 42,000 Sundry Debtors 1,20,000

Capital Accounts : Stock 1,40,000

X 2,40,000 Fixed Assets 1,50,000

Y 1,20,000 3,60,000

4,30,000 4,30,000

The partners decided that with effect from 1st April 2021, they will share profits and losses in
the ratio of 4 : 2 : 1. For this purpose goodwill is to be valued at 2 year’s purchase of the
average profits of the last four years, which were :

Year ending 31st March 2018 20,000 (Loss)

Year ending 31st March 2019 48,000 (Profit)

Year ending 31st March 2020 60,000 (Profit)

Year ending 31 st March 2021 80,000 (Profit)

They further agreed that:

(i) Provision for doubtful debts be increased by ₹2,000.
(ii) Stock be appreciated by 20% and fixed assets be depreciated by 10%.
(iii) Creditors be taken at ₹49,000.
Partners do not desire to record the revised values of assets and liabilities in the books. They
also desire to leave the reserve and surplus undisturbed.
You are required to give effect to the change in profit sharing ratio by passing a single journal
entry. Also prepare the revised balance sheet.
[Ans. Value of Goodwill ₹ 84,000; Profit on Revaluation ₹ 21,000; Adjustment entry : Debit L
by ₹ 35,000 and Credit M and N by ₹ 7,000 and ₹ 28,000 respectively. Total of Balance Sheet
₹ 4,80,000.]
Q. 30. Anshu, Anju and Anupma are partners in a firm sharing profit in the ratio of 2 : 2 : 1.
Their Balance Sheet as at March 31, 2023 was as follows :
BALANCE SHEET
as at March 31, 2023

Liabilities ₹ Assets ₹
Creditors 65,000 Land 2,00,000

Bills Payable 7,000 Building 80,000

General Reserve 48,000 Plant 1,60,000

Capital : Stock 2,10,000

Anshu 2,40,000 Debtors 50,000

Anju 2,00,000 Cash 20,000

Anupma 1,60,000 6,00,000

7,20,000 7,20,000

Anshu, Anju and Anupma decided to share the profit equally, w.e.f. April 1,2023. For this
purpose it was agreed that:
(i) The goodwill of the firm should be valued at ₹60,000.
(ii) Land should be revalued at ₹ 3,00,000 and building and plant should be depreciated by
5%. Stock be valued at ₹2,25,000.
(iii) Creditors amounting to ₹ 2,000 were not likely to be claimed and hence should be written
off. You are required to :
(a) Record the necessary journal entries to give effect to the above agreement, without
opening revaluation account;
(b) Prepare the capital accounts of the partners; and
(c) Prepare the balance sheet of the firm after reconstitution.
Partners decide that General Reserve is to be transferred to Capital Accounts whereas revised
values of assets and liabilities are not to be recorded in the books.
[Ans. Capitals : Anshu ₹2,70,200; Anju ₹2,30,200 and Anupma ₹ 1,47,600. Balance Sheet
Total ₹7,20,000.
Q 31. Amar, Tarun and Akhil are partners sharing profits and losses in the ratio of 5 : 3 : 2.
Their Balance Sheet as at 31st March, 2023 was as follows:

Liabilities ₹ Assets ₹

Sundry Creditors 1,90,000 Cash in Hand 25,000

General Reserve 80,000 Bank Balance 2,25,000

Profit & Loss A/c 30,000 Sundry Debtors 1,10,000

Less: Provision for Doubtful

Capital A/cs:
Debts 10,000 1,00,000

Amar 3,00,000 Stock 2,00,000

Tarun 1,80,000 Furniture 50,000

Akhil 1,20,000 6,00,000 Computers 3,00,000

 9,00,000 9,00,000

Profit-sharing ratio among the partners was agreed to be 2 : 2 : 1 w.e.f. 1st April, 2023. They
agreed to the following:
(i) Stock to be increased to ₹ 2,20,000.
(ii) Provision for Doubtful Debts to be reduced by ₹ 2,000.
(iii) Furniture to be reduced by 20%.
(iv) Computers to be reduced to ₹ 2,70,000.
(v) Goodwill of the firm is valued at ₹ 1,00,000.
The partners decided to carry the assets, liabilities, General Reserve and Profit & Loss
Account at the same values in the Balance Sheet of the new firm.
Pass an adjustment entry giving effect to the above arrangement and prepare Balance Sheet
after adjustments.
Q. 32. X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. Their position
as at 31st March 2023 was as follows :

Liabilities ₹ Assets ₹

Sundry Creditors 44,000 Cash in Hand 8,000

Outstanding Expenses 10,000 Cash at Bank 22,000

Capitals : Debtors 56,000

X 2,80,000 Less : Provision 6,000 50,000

Y 2,80,000 Stock 2,80,000

Z 1,00,000 6,60,000 Machinery 1,54,000

Building 2,00,000

7,14,000 7,14,000

It was decided that with effect from 1st April 2023, profit and loss sharing ratio will be 3 : 3 : 1.
They agreed on the following terms :
(i) Goodwill of the firm be valued at two year’s purchase of the average super profits of last
three years. Average profits of the last three years are ₹ 1,08,000, while the normal profits
may be taken at ₹66,000.
(ii) Provision on debtors be reduced by ₹2,000.
(iii) Value of stock be increased by 10% and machinery be valued at ₹ 1,00,000.
(iv) An item of ₹3,000 included in sundry creditors is not likely to be claimed.
Partners do not want to record the altered values of assets and liabilities in the books. Pass
an entry to give effect to the above and prepare the revised balance sheet.
[Ans. Loss on Revaluation ₹21,000; Value of Goodwill ₹84,000. Debit Y by ₹8,100 and Credit
X and Z by ₹4,500 and ₹3,600 respectively. Total of Balance Sheet ₹7,14,000.]
Q. 33. The following is the balance sheet of a firm as at 31st March, 2023 :
 Liabilities ₹ Assets ₹

Capital Accounts : Building 6,50,000

A 4,00,000 Plant and Machinery 5,00,000

B 4,00,000 Stock 3,00,000

C 3,00,000 Debtors 2,40,000

D 3,00,000 14,00,000 Bills Receivable 10,000

Reserves 1,50,000 Cash at Bank 20,000

Profit & Loss A/c (Profits) 90,000

Creditors 80,000

17,20,000 17,20,000

On 1st April, 2023, the assets and liabilities were revalued as under : ₹

Building 8,00,000

Plant and Machinery 3,20,000

Stock 2,60,000

Creditors 84,000

A provision of 5% was required on debtors. Goodwill of the firm is valued at ₹ 1,70,000.

Partners agreed that from 1 st April, 2023 they will share profits in the ratio of 4 : 3 : 2 : 1
instead of their former ratio of 5 : 4 : 2 : 1. They do not want to record the revised values of
assets and liabilities in the books. They al so do not want to disturb the reserves and Profit &
Loss A/c.
Pass a single journal entry to give effect to the above.
[Ans. Loss on Revaluation ₹ 86,000; Debit C by ₹ 10,800andDby ₹ 5,400; Credit A by ₹5,400
and B by ₹ 10,800.]

Q.34.Brijesh, Charu and Dilip are partners sharing profits and losses in the ratio of 3:2: 1. Their
balance sheet as at 31st March, 2021 was as follows :

Liabilities ₹ Assets ₹

Creditors 87,000 Cash 30,000

Reserves 42,000 Debtors 62,000

Profit & Loss A/c (Profits) 21,000 Less: Provision for

Capital Accounts : doubtful debts 2,000 60,000

Brijesh 3,00,000 Stock 1,80,000

Charu 3,00,000 Furniture 30,000

Dilip 50,000 6,50,000 Plant 2,00,000

Building 3,00,000

8,00,000 8,00,000

The partners agreed that from 1st April, 2021 they will share profits and losses in the ratio of
4 : 4 : 1. They agreed that:
(i) Stock is to be valued at 20% less.
(ii) Provision for doubtful debts to be increased by ₹ 1,500.
(iii) Furniture is to be depreciated by 20% and plant by 15%.
(iv) ₹3,500 are outstanding for salaries.
(v) Building is to be valued at ₹3,50,000.
(vi) Goodwill is valued at ₹45,000.
Partners do not want to record the altered values of assets and liabilities in the books and
want to leave the reserves and profits undisturbed.
You are required to pass a single journal entry to give effect to the above. Also prepare the
revised balance sheet.
 ADMISSION OF A PARTNER
Q. 1 (A) and B are partners sharing profits in the ratio of 5 : 3. C is admitted to the partnership
for 1/4th share of future profits. Calculate the new profit sharing ratio.
[Ans. New Ratio 15:9:8.]
Q. 1 (B). A and B were partners sharing profits in the ratio of 21 : 9. C was admitted on 9/21
share in the profits. Calculate new profit sharing ratio of the partners.
[Ans. New Ratio 14:6: 15.]
2. Girija, Yatin and Zubin 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.
[Ans.: New Profit-sharing Ratio—10:6 :4 :5.]
Q. 3 (A). X and Y are partners sharing profits in the ratio of 2 : 1. Z is admitted with 5/11th
share which he takes 3/11th from X and 2/11th from Y. Calculate the new profit sharing ratio
of the partners.
[Ans. 13 : 5 : 15.]
Q.3 (B). A and B are partners sharing profits in the ratio of 5 : 3. They admit C on 1/4th share
which he acquires 1/6th from A and 1/12th from B. Calculate the new profit sharing ratio of the
partners.
[Ans. 11 : 7 : 6 .]
Q. 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. [Ans.: New
Profit-sharing Ratio—5:2: 3; Sacrificing Ratio—2: 1.](CBSE Sample Paper 2015)
Q. 5 X and Yare partners sharing profits and losses in the ratio of 3 : 2. They admit Z as a new
partner who gets 1/5th share. Calculate the new profit sharing ratio in each of the following
cases :
(i) If Z acquires his share from X and Y in their profit sharing ratio; (ii) If he acquires 3/20th
from X and 1/20th from Y; (iii) If he acquires 1/10th from X and 1/10th from Y; (iv) If he acquires
1/20th from X and 3/20th from Y; (v) If he acquires his share entirely from X; (vi) If he acquires
his share entirely from Y.
[Ans. (i) 12 : 8 : 5; (ii) 9 : 7 : 4; (iii) 5 : 3 : 2; (iv) 11 : 5 : 4; (v) 2 : 2 : 1 and (vi) 3 : 1 : 1.]
1
Q. 6 A and B are partners sharing profits in the ratio of 3 : 2. C is admitted for 5th share of
profits out of which half share was gifted by A and the remaining share was taken by C equally
from A and B. Calculate new profit sharing ratio.
[Ans. New Ratio 9 : 7 : 4]
Q.7 A and B are partners in a firm sharing profits in the ratio of 2 : 1. C joins the firm. A
surrenders I/4th of his share and B 1/5th of his share in favour of C. Find the new profit sharing
ratio.
[Ans. New Ratio 15 : 8 : 7]
Q. 8 A and B share profits in the ratio of 3 : 2. They agreed to admit C on the condition that A
will sacrifice 3/20th of his share of profit in favour of C and B will sacrifice 1/20th of his profits
in favour of C. Calculate new profit sharing ratio.
[Ans. 51 : 38 : 11.]
Q. 9 X and Y are partners in a firm sharing profits and losses in the ratio of 9:6 .A new' partner
Z is admitted. X surrenders 3/15th share of his profit in favour of Z and Y 6/15th of his share
in favour of Z. Calculate 'new profit sharing ratio.
[Ans. New Ratio 12 : 6 : 7.]
Q.10 A and B are partners sharing profits in the ratio of 5 : 3. They admit C on 1/4th share
which he acquires 1/6th from A and 1/12th from B. Calculate the new profit sharing ratio of the
partners.
[Ans. 11 : 7 : 6 .]
Q. 11. P and Q are partners sharing profits and losses in the ratio of 4 : 3. They admit R as
partner for a 1/7th share in profits which he acquires equally from P and Q. Calculate new
profit sharing ratio of the partners.
[Ans. 7:5:2.]
Q. 12 R and S share profits in the ratio of 3 : 2. They admitted T as partner for 1/4 share which
will be borne by R and S equally. Find out the new profit sharing ratio.
[Ans. New Profit Sharing Ratio 19:11: 10.]
Q. 13 P, Q and R were partners in a firm sharing profits in the ratio of 3 : 2 :1. They admitted
S' as a new partner for l/8th share in the profits which he acquired 1/16th from P and 1/16th
from Q. Calculate new profit sharing ratio of P, Q, R and S.
[Ans. New Ratio 21 : 13 : 8 : 6.]
Q. 14 Find New Profit-sharing Ratio:
(i) R and T are partners in a firm sharing profits in the ratio of 3 : 2. S joins the firm. R surrenders
1 /4th of his share and T 1 /5th of his share in favour of S.
(ii) A and B are partners. They admit C for 1/4th share. In future, the ratio between A and B
would be 2 :1.
(iii) A and B are partners sharing profits and losses in the ratio of 3 : 2. They admit C for 1 /5th
share in the profit. C acquires 1 /5th of his share from A and 4/5th share from B.
(iv) 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. (CBSE2020 C)
(v) A and B are equal partners. They admit C and D as partners with 1/5th and 1/6th share
respectively.
(vi) A and B are partners sharing profits in the ratio of 5 : 3. C is admitted for 3/10th share of
profit half of which was gifted by A and the remaining share was taken by C equally from A
and B.
[Ans.: (i) New Profit-sharing Ratio of R, T and S—45 : 32 : 23; (ii) New Profit-sharing Ratio
of A, B and C—2 : 1; 1; (iii) New Profit-sharing Ratio of A, B and C—14 : 6 :5; (iv) New Profit-
sharing Ratio of A, B, C and D—12 : 8 : 5 : 5; (v) New Profit-sharing Ratio of A, B, C and D—
19 : 19: 12 : 10; (vi) New Profit-sharing Ratio of A, B and C—4 :3:3.]
Q. 15 Gautam and Yashica are partners sharing profits and losses in the ratio of 3 : 2. They
admit Asma into partnership. Gautam gives 1/3rd of his share while Yashica gives 1/10th
from his share to Asma. Calculate new profit-sharing ratio and sacrificing ratio.
[Ans.: New Profit-sharing Ratio—4 :3 :3; Sacrificing Ratio—2:1.]
16 A, B and C are partners sharing profits in the ratio of 2 : 2 : 1. D is admitted as a new
partner for 1/6th share. C will retain his original share. Calculate the new profit-sharing ratio
and sacrificing ratio.
[Ans.: New Profit-sharing Ratio—19: 19: 12 : 10; Sacrificing Ratio—1 : 1.]
[Hint: When the sacrifice of partners is not given, then sacrificing ratio is same as the old ratio.
So, Sacrificing Ratio of A and B = 2 : 2 or 1 : 1.]
17 Gautam and Yashica are partners sharing profits and losses in the ratio of 3 : 2. They admit
Asma into partnership. Gautam gives 1/3rd of his share while Yashica gives 1/10th from his
share to Asma. Calculate new profit-sharing ratio and sacrificing ratio.
[Ans.: New Profit-sharing Ratio—4 :3 :3; Sacrificing Ratio—2:1.]
18 A, B and C are partners sharing profits in the ratio of 2 : 2 : 1. D is admitted as a new
partner for 1/6th share. C will retain his original share. Calculate the new profit-sharing ratio
and sacrificing ratio.
[Ans.: New Profit-sharing Ratio—19: 19: 12 : 10; Sacrificing Ratio—1 : 1.]
[Hint: When the sacrifice of partners is not given, then sacrificing ratio is same as the old ratio.
So, Sacrificing Ratio of A and B = 2 : 2 or 1 : 1.]
19 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.
[Ans.: New Profit-sharing Ratio of A, 6, C, D and E—6 :8 : 4 : 2 :5.]
20 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.
[Ans.: New Profit-sharing Ratio of Amit, Vidya and Chintan—14:6 :5;
Sacrificing Ratio of Amit and Vidya—7:4.]
[Hint: Since Chintan acquires 1/5th of his share from Amit, it means he acquires 4/5th (i.e., 1
- 1/5) of his share from Vidya.
if 4/5 of Chintan's share = 4/25 (Received from Vidya)
Chintan's share = 4/25 × 5/4 = 1/5
Share acquired by Chintan: from Amit = 1/5 × 1/5 = 1/25; from Vidya = 4/25.]

Admission of a Partner and Treatment of Goodwill

Cr. B's Capital A/c by ₹ 18,750.]
21. Geeta and Sunita are partners in a firm sharing profits in the ratio of 3:2. They admit Anita
as a new partner. The new profit-sharing ratio between Geeta, Sunita and Anita will be 5 : 3 :
2. Anita brought in ₹ 25,000 for her share of premium for goodwill. Pass necessary Journal
entries for the treatment of goodwill.
[Hint: Goodwill will be shared by Geeta and Sunita equally.]
22 A and 8 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 snare of profits will be 1/5th which he takes 1/10th from A and
1/10th from 8.
Pass Journal entries and also calculate future profit-sharing ratio of the partners.
[Ans.: New Profit-sharing Ratio—21; 11:8.]
23 A and B are partners in a business sharing profits and losses in the ratio of 1 /3rd and
2/3rd. On 1st April, 2022, their capitals were ₹ 8,000 and ₹ 10,000 respectively. On that date,
they admit C in partnership and give him 1 /4th share in the future profits. C brings ₹ 8,000 as
his capital and ₹ 6,000 as goodwill. The amount of goodwill is withdrawn by the old partners
in cash. Pass the Journal entries and show the Capital Accounts of all the Partners. Calculate
proportion in which partners would share profits and losses in future.
[Ans.: New Ratio—1 :2 : 1; Capital A/cs: A—₹ 8,000; B—₹ 10,000; C—₹ 8,000.]
24 A and B were partners in a firm sharing profits and losses in the ratio of 3 : 2. They admitted
C as a new partner for 3/7th share in the profit and the new profit-sharing ratio will be 2 : 2 :
3. C brought ₹ 2,00,000 as his capital and ₹ 1,50,000 as premium for goodwill. Half of their
share of premium was withdrawn by A and B from the firm. Calculate sacrificing ratio and pass
necessary Journal entries for the above transactions in the books of the firm. (Delhi 2009 C)
[Ans.: Sacrificing Ratio— 11: 4.]
Q.25..L, M and N are partners sharing profits in the ratio of 3 : 2 : 1. They admit O into
partnership. O brings in cash ₹4,50,000 as capital and ₹ 1,50,000 as goodwill for 1/5th share
of profits. Pass journal entries and find out new profit sharing ratios when: (a) Goodwill is
retained in the firm; (b) goodwill is withdrawn by old partners.
[Ans. New Profit sharing ratio = 6 : 4 : 2 : 3.]
26 Gold and Silver are partners sharing profits and losses in the ratio of 2 : 5. They admit
Copper on the condition that he will bring ₹ 14,000 as his share of goodwill to be distributed
between Gold and Silver. Copper's share in the future profits or losses will be 1/4th. What will
be the new profit-sharing ratio and what amount of goodwill brought in by Copper will be
received by Gold and Silver?
[Ans.: Gold will get ₹ 4,000; Silver will get ₹ 10,000; New Profit-sharing Ratio—6:15:7.]
27 Vimal and Nirmal are partners in a firm sharing profits and losses in the ratio of 3 : 2. A new
partner Kailash is admitted. Vimal gives 1 /5th of his share and Nirmal gives 2/5th of his share
in favour of Kailash. For the purpose of Kailash's admission, goodwill of the firm is valued at
₹ 75,000 and Kailash brings his share of goodwill in cash which is retained in the business.
Journalise the above transactions.
[Ans.: New Ratio—12:6:7; Sacrificing Ratio—3:4; Kailash’s Share of Goodwill—₹ 21,000 (₹
75,000 x 7/25);
(i) Dr. Bank A/c and Cr. Premium for Goodwill A/c by ₹ 21,000; (ii) Dr. Premium for
Goodwill A/c by ₹ 21,000; Cr. Vimal's Capital A/c by ₹ 9,000 and Nirmal's Capital A/c by ₹
12,000.]

Q. 28. P and Q are partners sharing profits and losses in the ratio of 2 : 1. They admit R into
partnership for 4/9th share in profits which he acquires equally from P and Q. R brings in cash
₹2,50,000 as capital and ₹ 1,80,000 as goodwill.
Pass journal entries and find out new profit sharing ratios.
[Ans. New profit sharing ratio is 4 : 1 : 4.]
Q. 29 X and Y are partners sharing profits in the ratio of 4 : 3. Z joins partnership for 2/7th
share in the profits (of which he acquires 3/4th from X and 1/4th from Y). Z brings in ₹3,00,000
for his capital and ₹ 1,20,000 for goodwill. Half of the amount of goodwill is withdrawn by the
old partners.
Pass necessary Journal entries and find out new profit sharing ratio.
[Ans. New profit sharing ratio is 5 : 5 : 4.]
Q. 30 . K and F were partners in a firm sharing profits in 3 : 2 ratio. They admitted Z as a new
partner for 1/3rd share in the profits of the firm. Z acquired his share from K and Fin 2 : 3 ratio.
Z brought ₹80,000 for his capital and ₹ 3 0,000 for his 1/3rd share as premium. Calculate the
new profit sharing ratio of K, Y and Z and pass necessary journal entries for the above
transactions in the books of the firm.
[Ans. New profit sharing ratio of K, Y and Z
31. Strong and Weak are partners sharing profits in the ratio of 2 : 3. On 1st April, 2023, they
admit Able as partner for 1/4th share in profits. Able brought ₹ 1,00,000 as his capital and ₹
36,000 as premium for goodwill for his 1/4th share in the profits. New profit-sharing ratio of
Strong, Weak and Able is agreed to be 3:3:2. Strong and Weak withdraw the premium for
goodwill. Pass the necessary Journal entries
32. X and Y are partners in a firm sharing profits in the ratio of 4 : 3. On 1st April, 2023, they
admitted Z as a partner. Z brought ₹ 1,00,000 for his capital and ₹ 21,000 for 1/3rd share of
goodwill premium. On Z's admission, goodwill existed in the books of the firm at ₹ 28,000.
Pass necessary Journal entries on Z's admission
33. A and B were partners in a firm sharing profits in the ratio of 4 : 3. They admitted C as a
new partner for 3/7th share in the profits of the firm. New profit-sharing ratio will be 2 : 2 : 3. C
brought ₹ 2,00,000 as his capital and ₹ 60,000 for his share of premium for goodwill, half of
which was withdrawn by A and B from the firm.
Calculate sacrificing ratio and pass necessary Journal entries in the books of the firm for the
above transactions. (AI 2009 C)
Q. 34 A and B are partners sharing profits and losses as 2 : 1. On 1st April, 2021 they admit
C as a partner for 1/4th share who pays ₹4,50,000 as goodwill privately. On 1st April, 2022,
they take D as a partner for 3/5th share who brings ₹4,00,000 as goodwill, out of which half is
withdrawn by the existing partners. On 1st April, 2023, E is admitted as a partner for l/6th
share who brings ₹5,00,000 as goodwill which is retained in the business.
Journalise the above transactions in the books of the firm.
[Ans. New profit sharing ratios : 2021 —2:1:1; 2022 — 2 : 1 : 1 : 6; and 2023 — 2 : 1 : 1 : 6 :
2.]
Q. 35. P and Q are partners sharing profits & losses as 2 : 3. R and S are admitted and profit
sharing ratio becomes 3 : 4 : 3 : 2. Goodwill is valued at ₹3,00,000, R brings required goodwill
and ₹2,00,000 cash for Capital. S brings in ₹ 1,00,000 cash and Motor Vehicle for ₹ 80,000
as his capital in addition to the required amount of goodwill in cash.
Show the necessary journal entries.
[Ans. Sacrificing Ratio 9 : 16.]
Q. 36 Ram and Rahim are partners in a firm sharing profits in the ratio of 3 : 2. On April 1,
2021 they admit Raj as a new partner for 3/13th share in the profits. The new ratio will be 5 :
5 : 3. Raj contributed the following assets towards his capital and for his share of goodwill :
Land ₹2,50,000; Plant & Machinery ₹ 1,50,000; Stock ₹80,000 and Debtors ₹70,000. On the
date of admission of Raj, the goodwill of the firm was valued at ₹5,20,000. Record necessary
journal entries in the books of the firm.
[Ans. Premium for Goodwill ₹ 1,20,000 will be credited to Ram and Rahim in the sacrifice ratio
of 14 : 1.]
Q. 37 A and B are partners, sharing profit and losses in the ratio of 3 : 2. Goodwill appears in
their Balance Sheet at ₹24,000, when C is admitted into partnership for 1/5th share in profit.
He pays ₹50,000 for capital and ₹ 8,000 as goodwill. The ratio of the partners A, B and C in
the new firm would be 2 : 2 : 1.
Pass journal entries in the books of the new firm to record above adjustments.
[Ans. Premium for goodwill ₹8,000 is transferred to A’s capital.
Old goodwill ₹24,000 will be written off in A and B in the ratio of 3 : 2.]
Q. 38. P and S are partners sharing profits in the ratio of 3 : 2. Their books showed goodwill
at ₹20,000, R is admitted with 1/5th share which he acquires equally from P and S. R brings
₹20,000 as his capital and ₹ 10,000 as his share of goodwill. Profits at the end of the year
were of the amount of ₹ 1,00,000. You are required to give journal entries to carry out the
above arrangement.
[Ans. New Ratio 5:3:2.]
Q. 39. A and B carrying on business as partners used to share profits and losses thus; A
4/7ths and B 3/7ths, and goodwill appeared in the books of the firm at ₹2,80,000 when C was
admitted as a partner having l/7th share in profits and losses. C was asked to pay a premium
of ₹75,000 for goodwill, and the profit-sharing ratio as between A and B remained unchanged.
Show entries in the journal of the firm.
[Ans. Goodwill of ₹2,80,000 written off by A and B in their old ratio, i.e., 4 : 3.]
40 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.
[Ans.: (a) Dr. Rao's Current A/c by ₹ 7,500; Cr. Murty’s Capital A/c by ₹ 4,500 and Shah's
Capital A/c by ₹ 3,000.
(b) (i) Dr. Murty's Capital A/c by ₹ 6,000 and Shah's Capital A/c by ₹ 4,000; Cr. Goodwill A/c
by ₹ 10,000.
(ii) Dr. Rao's Current A/c by ₹ 7,500; Cr. Murty's Capital A/c by ₹ 4,500 and Shah's Capital
A/c by ₹ 3,000.]
41 A, B and C are in partnership sharing profits in the ratio of 5 :4:1. Two new partners D and
E are admitted and the new profit-sharing ratio is 3 : 4 : 2 : 2 : 1. D is to pay ₹ 90,000 for his
share of Goodwill but E is unable to bring his share of Goodwill. Both the new partners
introduced ₹ 1,20,000 each as their capital. You are required to pass necessary Journal
entries.
[Ans.: (i) Sacrificing Ratio between A and B - 15: 4. Since C is gaining 4/60th share in the
profits, he will also compensate A and B proportionately (i.e., ₹ 5,40,000 x 4/60 = ₹ 36,000).
(ii) For Adjustment of Goodwill: Dr. C's Capital A/c by ₹ 36,000; E’s Current A/c by ₹ 45,000
and Premium for Goodwill A/c by ₹ 90,000; Cr. A's Capital A/c by ₹ 1,35,000 and B’s Capital
A/c by ₹ 36,000.]

42. X and Y are partners sharing profits in the ratio of 5 : 3. They admit Z into the partnership
for l/8th share. For this purpose, he was to bring ₹ 20,000 as capital and ₹ 16,000 as his share
of goodwill. Pass Journal entries in respect of goodwill only through Goodwill Account. Assume
Z does not bring his share of goodwill in cash.
Amit and Barun are partners sharing profits in the ratio of 3 : 2. They admit Chanda into the
firm for 3/7th profits which he takes 2/7th from Amit and l/7th from Barun. He brings ₹ 18,000
as premium for goodwill out of his share of ₹ 24,000. Goodwill appears in the books at ₹ 5,000.
New profit-sharing ratio of Amit, Barun and Chanda is 11 : 9 : 15 respectively. Pass Journal
entries.
Q. 43 (HOTS) X and Y are partners sharing profits in the ratio of 3 : 1. Z is admitted as a
partner for which he pays ₹30,000 for goodwill in cash. X, Y and Z decided to share future
profits in equal proportion. You are required to pass necessary journal entries to give effect to
the above.
5 1 1
[Ans. X sacrifices 12 whereas Y gains 12 and Z gains 3. Entry will be :
Premium for Goodwill A/c Dr. 30,000

Y’s Capital A/c Dr. 7,500

To X’s Capital A/c 37,500]

Q. 44. (HOTS) A, B and C were partners in a firm sharing profits in the ratio of 2 : 2 : 1. They
1
admitted D for 6 th share in the profits. The new profit sharing ratio will be 13 : 8 : 4 : 5
respectively. D brought ₹5,00,000 for his capital and ₹60,000 for his share of goodwill. Pass
necessary entries.
1 4 2 5
[Ans. A Gains 30, B Sacrifices 30, C Sacrifices 30 and D gains 30. Entry will be:
Premium for Goodwill A/c Dr. 60,000
A’s Capital A/c Dr. 12,000
To B’s Capital A/c 48,000
To C’s Capital A/c 24,000]
Q. 45 (HOTS) A and B were partners in a firm sharing profits in the ratio of 4 : 1.
1
They admitted C as a new partner on 1-3-2019 for th share. It was decided that A, B and C
5
will share future profits in the ratio of 5 : 3 : 2. C brought ₹20,000 in cash and machinery worth
₹60,000 for his share of profit as premium for goodwill. Showing your calculations clearly, pass
necessary journal entries in the books of the firm.
3 1 2
[Ans. A sacrifices 10 whereas B gains 10 and C gains 10. Entry will be :
Premium for Goodwill A/c Dr. 80,000
B’s Capital A/c Dr. 40,000
To A’s Capital A/c 1,20,000]
Q.46 X and Y are partners in a firm sharing profits in the ratio of 3 : 2. On 1st April, 2023, they
admit Z as a partner for 3/13th share in the profits. New ratio will be 5 : 5 : 3. Z contributed the
following assets to his capital and his share for premium for goodwill: Stock ₹ 80,000; Debtors
₹ 1,20,000; Land ₹ 2,00,000; Plant and Machinery ₹ 1,20,000.
On the date of admission of Z, goodwill of the firm was valued at ₹ 10,40,000. X and Y withdrew
their respective share of Premium for Goodwill. Pass necessary Journal entries in the books
of the firm on Z's admission.
Q.47 A and B are partners sharing profits and losses in the ratio of 3 : 2. They admit C into
partnership for 1/4th share, which he takes l/6th from A and 1/12th from B. Goodwill exists in
the books at ₹ 20,000. C brings ₹ 18,000 as goodwill out of his share of ₹ 30,000. It was
decided that shortfall in amount shall be debited to C's Current Account.
Pass necessary Journal entries for the above.
48. Hemant and Nishant were partners in a firm sharing profits in the ratio of 3 : 2. Their
capitals were ₹ 1,60,000 and ₹ 1,00,000 respectively. They admitted Somesh on 1st April,
2013 as a new partner for 1/5th share in the future profits. Somesh brought ₹ 1,20,000 as his
capital. Calculate the value of goodwill of the firm and record necessary Journal entries for the
above transactions on Somesh's admission. (A1 2014
Q.49 Abhay and Beena are partners in a firm. They admit Chetan as a partner with l/4th share
in the profits of the firm. Chetan brings ₹ 2,00,000 as his share of capital. Value of the total
assets of the firm is ₹ 5,40,000 and outside liabilities are valued at ₹ 1,00,000 on that date.
Give necessary entry to record goodwill at the time of Chetan's admission. Also, show your
working notes. (Delhi 2013)
Q.50 A and B are partners sharing profits in the ratio of 3 ; 2. They admit C into the firm for
3/7th profits (which he takes 2/7th from A and 1/7th from B) and brings ₹ 6,00,000 as premium
out of his share of ₹ 7,20,000. Goodwill account does not appear in the books of A and B.
Hint. Premium for Goodwill A/c will be debited by ₹6,00,000 and Current Account of C will be
debited by ₹ 1,20,000 and Capital Accounts of A and B will be credited by ₹4,80,000 and
₹2,40,000 respectively.
Q. 51 (HOTS) A and B are partners sharing profits in the ratio of 3 : 1. C is admitted as a
partner with 2/9th share; A and B will in future get 4/9th and 3/9th share of profits. C pays
₹2,00,000 for goodwill. Pass the necessary journal entries. '
[Ans. A sacrifices 11/36 whereas B gains 3/36 and C gains 8/36. Hence, Premium for Goodwill
A/c will be debited by ₹2,00,000 and B's Capital A/c will be debited by ₹75,000 and A’s Capital
A/c will be credited by ₹2,75,000.]
52. 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, 8
and C agree to share future profits and losses equally. Draft Journal entries showing
appropriations of the premium money.
Q. 53 (A). Hemant and Nishant were partners in a firm sharing profits in the ratio of 3 : 2. Their
capitals were ₹1,60,000 and ₹ 1,00,000 respectively. They admitted Somesh on 1st April,
2021 as a new partner for 1/5 share in the future profits. Somesh brought ₹ 1,20,000 as his
capital. Calculate the value of goodwill of the firm and record necessary journal entries for the
above transactions on Somesh’s admission,
[Ans. Hidden Goodwill ₹2,20,000; Somesh’s Current A/c will be debited by ₹44,000 and
Capital Accounts of Hemant and Nishant will be credited by ₹26,400 and ₹ 17,600
respectively.]
Q. 53 (B). X and Y are partners with capital of ₹ 13,00,000 and ₹20,00,000. They share profits
in the ratio of 1 : 2. They admit Z as a partner with 1/5th share in the profits of the firm. Z brings
in ₹ 12,00,000 as his share of capital. The Profit and Loss Account showed a credit balance
of ₹6,00,000 as on the date of admission of Z. Give the necessary Journal entries to record
the goodwill.
[Ans. Hidden Goodwill ₹9,00,000.]
Hint : Balance of P & L will be credited to the Capital Accounts of X and Y and hidden goodwill
will he calculated thereafter.
Q. 54. Asin and Shreya are partners in a firm. They admit Ajay as a new partner with 1/5th
share in the profits of the firm. Ajay brings ₹5,00,000 as his share of capital. The value of the
total assets of the firm was ₹ 15,00,000 and outside liabilities were valued at ₹5,00,000 on
that date. Give the necessary Journal entry to record goodwill at the time of Ajay’s admission.
Also show your workings.
[Ans. Hidden Goodwill ₹ 10,00,000; Ajay’s Current Account will be debited by ₹2,00,000 and
Capital Accounts of Asin and Shreya will be credited by ₹ 1,00,000 each.]
Q. 55 A, B and C were partners in a firm sharing profits in the ratio of 2 : 1 : 1. Their respective
capitals were A ₹3,00,000; B ₹2,00,000 and C ₹1,80,000. On 1st April, 2018 they admitted D
as a new partner. D brought ₹2,00,000 for his capital and necessary amount for his share of
goodwill premium. The new profit sharing ratio between A, B, C and D will be 1 ; 2 : 1 : 1.
Pass necessary journal entries for the above transactions in the books of the firm on D’s
admission.
[Ans. Hidden Goodwill ₹ 1,20,000; Entry for Premium for Goodwill :
Premium for Goodwill A/c Dr. 24,000
B’s Capital A/c Dr. 18,000
To A’s Capital A/c 36,000
To C’s Capital A/c 6,000
Q. 56. Following figures have been extracted from the books of X and Y who share profit and
losses in the ratio of 7 : 3.
₹
X’s Capital 3,00,000
Y’s Capital 1,50,000
Reserve 1,60,000
Profit & Loss Account 40,000
Advertisement Expenditure 10,000
1
On this date, they admit Z for 5th share and the new profit sharing ratio is agreed at 3 : 1 : 1.
Z brings in ₹3,00,000 as his Capital. Pass journal entry for recording goodwill.
[Ans. Hidden Goodwill ₹5,60,000; Z’s Current A/c will be debited by ₹ 1,12,000 and X and Y’s
Capital A/cs will be credited by ₹56,000 each. Sacrifice Ratio 1 : 1.]
Preparation of Revaluation Account, Partners' Capital Accounts and Balance Sheet
57. Amit and Anil are partners sharing profits and losses in the ratio of 2 : 1. Their Balance
Sheet as on 31st March, 2023 was as follows:

Liabilities ₹ Assets ₹

Sundry Creditors 58,000 Cash in Hand 5,000

General Reserve 12,000 Cash at Bank 45,000

Capital A/cs: Sundry Debtors 60,000

Amit 1,80,000 Stock 40,000

Anil 1,50,000 3,30,000 Machinery 1,00,000

Building 1,50,000

4,00,000 4,00,000

Ankit is admitted as a partner on the date of the Balance Sheet on the following terms:
(a) Ankit will bring in ₹ 1,00,000 as his capital and ₹ 60,000 as his share of goodwill for 1 /4th
share in profits.
(b) Machinery is to be appreciated to ₹ 1,20,000 and the value of building is to be appreciated
by 10%.
(c) Stock is found overvalued by ₹ 4,000.
(d) General Reserve will continue to appear in the books of the reconstituted firm at its original
value.
(e) A Provision for Doubtful Debts is to be created at 5% of debtors.
(f) Creditors were unrecorded to the extent of₹ 1,000.
Prepare Revaluation Account and Partners’ Capital Accounts.
[Ans.: Gain (Profit) on Revaluation Account—₹ 27,000; Partners' Capital Accounts:
Amit—₹ 2,40,000; Anil—₹ 1,80,000; Ankit—₹ 1,00,000.]
58. Vimal and Nirmal are partners in a firm sharing profits and losses in the ratio of 5 : 3. They
admit Kailash into the firm on 1st April, 2023, when their Balance Sheet was as follows:

Liabilities ₹ Assets ₹

Vimal's Capital 32,000 Goodwill 8,000

Nirmal's Capital 34,000 Machinery 38,000

General Reserve 8,000 Furniture 5,000

Bank Loan 6,000 Debtors 23,000

Creditors 6,000 Stock 7,000

Cash 5,000

86,000 86,000

Terms of Kailash's admission were as follows:

(i) Kailash will bring ₹ 30,000 as his share of capital and will be entitled to 1/3rd share in the
profits.
(ii) Kailash is not to bring goodwill in cash, Vimal and Nirmal raise the goodwill in the books.
(iii) Goodwill of the firm is valued on the basis of 2 years' purchase of the average profit of the
last three years. Average profit of the last three years is ₹ 6,000.
(iv) Machinery and stock are revalued at ₹ 45,000 and ₹ 8,000 respectively.
Prepare a Revaluation Account and Partners' Capital Accounts incorporating the above
adjustments.
[Ans.: Gain (Profit) on Revaluation—₹ 8,000; Partners' Capital Accounts:
Vimal—₹ 39,500; Nirmal—₹ 38,500; Kailash—₹ 30,000;
Kailash’s Current A/c (Dr.)—₹ 4,000.]

59. Following was the Balance Sheet of A and B who were sharing profits in the ratio of 2 : 1
as at 31st March, 2023:

Liabilities ₹ Assets ₹

Capital A/cs: Building 25,000

A 15,000 Plant and Machinery 17,500

B 10,000 25,000 Stock 10,000

Sundry Creditors 32,950 Sundry Debtors 4,850

 Cash in Hand 600

57,950 57,950

They admit C into partnership on 1st April, 2023 on the following terms:
(a) C was to bring ₹ 7,500 as his capital and ₹ 3,000 as goodwill for 1 /4th share in the firm.
(b) Values of the Stock and Plant and Machinery were to be reduced by 5%.
(c) A Provision for Doubtful Debts was to be created in respect of Sundry Debtors ₹ 375.
(d) Building was to be appreciated by 10%.
Pass necessary Journal entries to give effect to the arrangements. Prepare Profit & Loss
Adjustment Account (or Revaluation Account), Partners' Capital Accounts and Balance Sheet
of the new firm.
[Ans.: Revaluation Gain (Profit)—₹ 750; Capital A/cs: A—₹17,500;
B—₹ 11,250; C—₹ 7,500; Balance Sheet Total—₹ 69,200.]

New Profit-sharing Ratio: Case (a) 3:2: 5; (b) 7:3: 10; (c) 9:11:20.]
60. Given below is the Balance Sheet of A and Bon 31st March, 2023, who are carrying on
partnership business. A and B share profits and losses in the ratio of 2 : 1.
BALANCE SHEET OF A AND B as at 31st March, 2023

Liabilities ₹ Assets ₹

Bills Payable 10,000 Cash in Hand 10,000

Creditors 58,000 Cash at Bank 40,000

Outstanding Expenses 2,000 Sundry Debtors 60,000

Capital A/cs: Stock 40,000

A 1,80,000 Plant 1,00,000

B 1,50,000 3,30,000 Building 1,50,000

4,00,000 4,00,000

C is admitted as a partner on 1st April, 2023 on the following terms:

(a) C will bring ₹ 1,00,000 as his capital and ₹ 60,000 as his share of goodwill for 1 /4th share
in the profits.
(b) Plant is to be appreciated to ₹ 1,20,000 and the value of building is to be appreciated by
10%.
(c) Stock is found overvalued by ₹ 4,000.
(d) A provision for doubtful debts is to be created at 5% of sundry debtors.
(e) Creditors were unrecorded to the extent of ₹ 1,000.
Pass the necessary Journal entries, prepare the Revaluation Account and Partners' Capital
Accounts, and show the Balance Sheet after the admission of C. (NCERT, Modified)
[Ans.: Gain on Revaluation—₹ 27,000; Capital A/cs: A—₹ 2,38,000; B—₹ 1,79,000;
C—₹ 1,00,000; Balance Sheet Total—₹ 5,88,000.]
61. Balance Sheet of Madhu and Vidhi who are sharing profits in the ratio of 2 : 3 as at 31st
March, 2016 is given below:

Liabilities ₹ Assets ₹

Madhu's Capital 5,20,000 Land and Building 3,00,000

Vidhi's Capital 3,00,000 Machinery 2,80,000

General Reserve 30,000 Stock 80,000

Bills Payable 1,50,000 Debtors 3,00,000

Less: Provision 10,000 2,90,000

Bank 50,000

10,00,000 10,00,000

Madhu and Vidhi decided to admit Gayatri as a new partner from 1 st April, 2016 and their
new profit-sharing ratio will be 2 : 3 : 5. Gayatri brought ₹ 4,00,000 as her capital and her share
of goodwill premium in cash.
(a) Goodwill of the firm was valued at ₹ 3,00,000.
(b) Land and Building was found undervalued by ₹ 26,000.
(c) Provision for doubtful debts was to be made equal to 5% of the debtors.
(d) There was a claim of ₹ 6,000 on account of workmen compensation.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the
reconstituted firm. (Delhi 201₹ C)
[Ans.: Gain (Profit) on Revaluation—₹ 15,000; Capital A/cs: Madhu—₹ 5,98,000;
Vidhi—₹ 4,17,000; Gayatri—₹ 4,00,000; Total of Balance Sheet—₹ 15,71,000.]
Q. 62. X and Y share profits in the ratio of 5 : 3. Their balance sheet as at 31st March, 2022
was as follows :

Liabilities ₹ Assets ₹

Creditors 15,000 Cash at Bank 5,000

Provident Fund 10,000 Sundry Debtors 20,000

Workmen’s Compensation Less: Provision 600 19,400

Reserve 5,800 Stock 25,000

Capitals : Fixed Assets 80,000

X 70,000 Profit & Loss A/c 2,400

Y 31,000

1,31,800 1,31,800

They admit Z into partnership on 1st April, 2022 with 1/8th share in profits. Z brings ₹20,000
as his capital and ₹ 12,000 for goodwill in cash. Z acquires his share entirely from X. Following
revaluations are also made :
1. Provident fund is to be increased by ₹5,000.
2. Debtors are all good. Therefore, no provision is required on debtors.
3. Stock includes ₹3,000 for obsolete items.
4. Creditors are to be paid ₹ 1,000 more.
5. Fixed Assets are to be revalued at ₹70,000.
Prepare Journal entries, necessary accounts and new balance sheet. Also calculate the new
profit sharing ratio.
[Ans Loss on Revaluation ₹ 18,400; Capitals X ₹72,625; Y ₹25,375; Z ₹20,000; B/S total ₹
1,49,000. New Ratio 4:3:1.]
Hint: Workmen’s Compensation Reserve will be divided between the old partners.
Q. 63. A and B share profits in the proportions of 3/4 and 1/4. Their Balance Sheet as at March
31,2020 was as follows :

Liabilities ₹ Assets ₹

Sundry Creditors 4,15,000 Cash at Bank 2,65,000

Reserve Fund 40,000 Bills Receivable 30,000

Capital Accounts : Debtors 1,60,000

A 3,00,000 Stock 2,00,000

B 1,60,000 Fixtures 10,000

Land and Buildings 2,50,000

9,15,000 9,15,000

On April 1,2023, C was admitted into partnership for 1/4th share on the following terms :
(a) That C pays ₹ 1,00,000 as his capital.
(b) That C pays ₹50,000 for goodwill. Half of this sum is to be withdrawn by A and B.
(c) That stock and fixtures be reduced by 10% and a 5% provision for doubtful debts be created
on Sundry Debtors and Bills Receivable.
(d) That the value of land and buildings be appreciated by 20%.
(e) There being a claim against the firm for damages, a liability to the extent of ₹ 10,000 should
be created.
(f) An item of ₹6,500 included in sundry creditors is not likely to be claimed and hence should
be written back.
Record the above transactions (journal entries) in the books of the firm assuming that the profit
sharing ratio between A and B has not changed. Prepare the new Balance Sheet on the
admission of Mr. C.
[Ans. Profit on Revaluation ₹ 16,000; Capitals : A ₹3,60,750; B ₹ 1,80,250; C ₹ 1,00,000; Bank
Balance ₹3,90,000; Balance Sheet Total ₹ 10,59,500.]
Q.64. Following is the Balance Sheet of Shashi and Ashu sharing profits as 3 : 2.

Liabilities ₹ Assets ₹

Creditors 1,80,000 Debtors 2,20,000

General Reserve 2,50,000 Less : Provision for

Workmen’s Compensation Doubtful Debts 10,000 2,10,000

Reserve 1,50,000 Land & Building 1,80,000

Capital : Shashi 1,50,000 Plants & Machinery 1,20,000

Ashu 1,00,000 Stock 1,10,000

Bank 2,10,000

8,30,000 8,30,000

On admission of Tanya for 1/6th share in the profits it was decided that:
(i) Provision for doubtful debts to be increased by ₹ 15,000.
(ii) Value of land and building to be increased to ₹2,10,000.
(iii) Value of stock to be increased by ₹25,000.
(iv) The liability of workmen’s compensation claim was determined to be ₹ 1,20,000.
(v) Tanya brought in as her share of goodwill ₹ 1,00,000 in cash.
(vi) Tanya was to bring further cash of ₹ 1,50,000 for her capital.
Prepare Revaluation A/c, Capital A/cs and Balance Sheet of the new firm.
[Ans. Profit on Revaluation ₹40,000; Capital Accounts : Shashi ₹4,02,000; Ashu ₹2,68,000
and Tanya ₹ 1,50,000; B/S Total ₹ 11,20,000. Workmen Compensation Reserve amounting
to ₹30,000 has been divided among old partners.]
Q. 65 P and S were partners in a firm sharing profits in the ratio of 3 : 2. Their Balance Sheet
as at 31-3-2023 was as follows :

Liabilities ₹ Assets ₹

Bank Overdraft 20,000 Cash 8,000

Creditors 30,000 Debtors 30,000

Provision for bad debts 1,000 Bills Receivable 40,000

General Reserve 15,000 Stock 50,000

V’s Loan 20,000 Building 90,000

Capitals : Land 1,48,000

P 1,00,000

S 1,80,000 2,80,000

3,66,000 3,66,000

On 1-4-2023 they admitted has a new partner on the following conditions :

(i) V will get 1/8th share in the profits of the firm.
(ii) V’s loan will be converted into his capital.
(iii) The goodwill of the firm was valued at ₹ 80,000 and V brought his share of goodwill
premium in cash.
(iv) Provision for bad debts was to be made equal to 5% of the debtors.
(v) Stock was to be depreciated by 5%.
(vi) Land was to be appreciated by 10%.
Prepare Revaluation Account, Capital Accounts of P, S and V and the Balance Sheet of the
new firm as on 1-4-2023.
[Ans. Profit on Revaluation ₹ 11,800; Capital Accounts : P ₹1,22,080; S ₹ 1,94,720 and V
₹20,000; Balance Sheet Total ₹3,88,300.]
Q. 66. Raman and Aman were partners in a firm and were sharing profits in 3 : 1 ratio. On 31-
3-2019 their balance sheet was as follows :
BALANCE SHEET OF RAMAN AND AMAN
as at 31-3-2019

Liabilities ₹ Assets ₹

Provision for Bad Debts 7,000 Bank 24,000

Outstanding Expenses 18,000 Bills Receivable 80,000

Bills Payable 47,000 Sundry Debtors 95,000

Sundry Creditors 1,02,000 Stock 14,000

Workmen Compensation Reserve 55,000 Furniture 70,000

Capitals : Machinery 2,00,000

Raman 3,00,000 Land & Building 1,96,000

Aman 1,50,000 4,50,000

6,79,000 6,79,000
On the above date Suman was admitted as a new partner for 1/5th share in the profits on the
following conditions :
(i) Suman will bring ₹2,00,000 as her capital and necessary amount for her share of goodwill
premium. The goodwill of the firm on Suman’s admission was valued at ₹ 1,00,000.
(ii) Outstanding expenses will be paid off. ₹5,000 will be written off as bad debts and a
provision of 5% for bad debts on debtors was to be maintained.
(iii) The liability towards workmen compensation was estimated at ₹60,000.
(iv) Machinery was to be depreciated by ₹ 18,000 and Land and Building was to be depreciated
by ₹54,000.
Pass necessary journal entries for the above transactions in the books of the firm.
(C.B.S.E. 2020, Punjab)
[Ans. Loss on Revaluation ₹79,500]
Hint : Revaluation A/c Dr. 2,500
To Provision for Doubtful Debts 2,500

Q. 67. A and B share the profits of a business in the ratio of 5 : 3. They admit C into the firm
for a 1/4th share in the profits to be contributed equally by A and B. On the date of admission
of C, the Balance Sheet of the firm was as follows :

Liabilities ₹ Assets ₹

A’s Capital 3,00,000 Machinery 2,60,000

B’s Capital 2,00,000 Furniture 1,60,000

Workmen’s Compensation Reserve 40,000 Stock 1,20,000

Bank Loan 1,20,000 Debtors 80,000

Creditors 20,000 Bank 60,000

6,80,000 6,80,000

Terms of C’s admission were as follows :

(i) C will bring ₹3,30,000 for his share of capital and goodwill.
(ii) Goodwill of the firm has been valued at 4 year’s purchase of the average super profits of
last three yea₹ Average profits of the last three years are ₹2,20,000 while the normal profits
that can be earned with the capital employed are ₹ 1,40,000.
(iii) Furniture is to be appreciated by ₹60,000 and the value of stock is to be reduced by
₹20,000.
Prepare Revaluation Account, Partner’s Capital Accounts and the new Balance Sheet of A, B
and C.
[Ans. Revaluation Profit ₹40,000; Partner’s Capital Accounts : A ₹3,90,000; B ₹2,70,000 and
C ₹2,50,000; Total of Opening Balance Sheet ₹ 10,50,000.]
68. On 31st March 2017, the Balance Sheet of Abhir and Divya, who were sharing profits in
the ratio of 3 : 1 was as follows:
BALANCE SHEET OF ABHIR AND DIVYA as on 31st March, 2017
Liabilities ₹ Assets ₹
Creditors 2,20,000 Cash at Bank 1,40,000
Employees' Provident
Fund 1,00,000 Debtors 6,50,000
Investment Fluctuation
1,00,000 Less: Provision for Bad Debts 50,000 6,00,000
Reserve
General Reserve 1,20,000 Stock 3,00,000
Capitals: Investments (Market Value ₹ 4,40,000) 5,00,000
Abhir 6,00,000
Divya 4,00,000 10,00,000
15,40,000 15,40,000

They decided to admit Vibhor on 1st April, 201₹ for 1 /5th share.
(a) Vibhor shall bring ₹ 80,000 as his share of goodwill premium.
(b) Stock was overvalued by ₹ 20,000.
(c) A debtor whose dues of ₹ 5,000 were written off as bad debts, paid ₹ 4,000 in full
settlement.
(d) Two months' salary @ ₹ 6,000 per month was outstanding.
(e) Vibhor was to bring in Capital to the extent of 1 /5th of the total capital of the new firm.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the
reconstituted firm. (Delhi 2018 C)
[Ans.: Loss on Revaluation—₹ 28,000; Partners' Capital A/cs: Abhir—₹ 7,59,000;
Divya—₹ 4,53,000 and Vibhor—₹ 3,03,000; Balance Sheet Total—₹ 18,47,000.]
69. Rajesh and Ravi are partners sharing profits in the ratio of 3 :2. Their Balance Sheet at
31st March, 2023 stood as:
BALANCE SHEET as at 31st March, 2023

Liabilities ₹ Assets ₹

Creditors 38,500 Cash 2,000

Outstanding Rent 4,000 Stock 15,000

Capital A/cs: Prepaid Insurance 1,500

Rajesh 29,000 Debtors 9,400

Less: Provision for Doubtful

Ravi 15,000 44,000 Debts 400 9,000

Machinery 19,000

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.
[Ans.: Gain (Profit) on Revaluation—₹ 3,650; Capital A/cs: Rajesh—₹ 32,825;
Ravi—₹ 18,095; Raman—₹ 16,000; Balance Sheet Total—₹ 1,09,420.]
[Hints: (i) Calculation of Hidden Goodwill:
A. Total Capital of the firm on the basis of Raman's ₹
Capital (₹ 16,000 × 10/2) 80,000
B. Whereas, Adjusted Capital of Rajesh (excluding goodwill)
= ₹ 29,000 + ₹ 2,190 (Gain (Profit) on Revaluation)
Adjusted Capital of Ravi (excluding goodwill) 31,190

= ₹ 15,000 + ₹ 1,460 (Gain (Profit) on Revaluation) 16,460

Raman's Capital 16,000

63,650

C. Value of Hidden Goodwill (A - B) = ₹ 80,000 - ₹ 63,650 = ₹ 16,350.

(ii) Raman's Current A/c will be debited by his share of goodwill, i.e., ₹ 3,270 and Capital A/cs
of Rajesh and Ravi will be credited in their sacrificing ratio, i.e., equally.)
70. On 31st March, 2019, the Balance Sheet of A and B, who were sharing profits in the ratio
of 3 : 2 was as follows:

Liabilities ₹ Assets ₹

Creditors 30,000 Cash at Bank 20,000

Investment Fluctuation
Fund 12,000 Debtors 85,000

Less: Provision for Bad

General Reserve 25,000 Debts 5,000 80,000

Capital A/cs: Stock 1,30,000

A 1,60,000 Investments 60,000

B 1,40,000 3,00,000 Furniture 77,000

3,67,000 3,67,000

On 1st April, 2019, they decided to admit C as a new partner for 1 /5th share in the profits on
the following terms:
(i) C brought ₹ 1,00,000 as his capital and ₹ 50,000 as his share of premium for goodwill.
(ii) Outstanding salaries of ₹ 2,000 be provided for.
(iii) The market value of investments was ₹ 50,000.
(iv) A debtor whose dues of ₹ 18,000 were written off as bad debts paid ₹ 12,000 in full
settlement. Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet
of the new firm. (CBSE 2020 C)
[Ans.: Gain(Profit) on Revaluation—₹ 10,000; Partners' Capital A/cs: A—₹ 2,12,200;
B—₹ 1,74,800; C—₹ 1,00,000; Balance Sheet Total—₹ 5,19,000.]
71. Divya, Yasmin and Fatima are partners in a firm, sharing profits and losses in 11 : 7 : 2
respectively. The Balance Sheet of the firm on 31st March, 2018 was as follows:
BALANCE SHEET as at 31st March, 2018

Liabilities ₹ Assets ₹

Sundry Creditors 70,000 Factory Building 7,35,000

Public Deposits 1,19,000 Plant and Machinery 1,80,000

Reserve Fund 90,000 Furniture 2,60,000

Outstanding Expenses 10,000 Stock 1,45,000

Capital A/cs: Debtors 1,50,000

Divya 5,10,000 Less: Provision (30,000) 1,20,000

Yasmin 3,00,000 Cash at Bank 1,59,000

Fatima 5,00,000 13,10,000

15,99,000 15,99,000

On 1st April, 2018, Aditya is admitted as a partner for one-fifth share in the profits with a capital
of ₹ 4,50,000 and necessary amount for his share of goodwill on the following terms:
(a) Furniture of ₹ 2,40,000 were to be taken over Divya, Yasmin and Fatima equally.
(b) A creditor of ₹ 7,000 not recorded in books to be taken into account.
(c) Goodwill of the firm is to be valued at 2.5 years' purchase of average profits of last two
years. The profits of the last three years were:
2015-16—₹ 6,00,000; 2016-17—₹ 2,00,000; 2017-18—₹ 6,00,000.
(d) At time of Aditya's admission. Yasmin also brought in ₹ 50,000 as fresh capital.
(e) Plant and Machinery is re-valued to ₹ 2,00,000 and expenses outstanding were brought
down to ₹ 9,000. Prepare Revaluation Account, Partners' Capital Accounts and the Balance
Sheet of the reconstituted firm. (CBSE Sample Paper 2018)
[Ans.: Gain on Revaluation—₹ 14,000; Partners’ Capital A/cs: Divya—₹ 5,97,200;
Yasmin—₹ 3,76,400; Fatima—₹ 4,50,400; and Aditya—₹ 4,50,000; Balance Sheet Total—₹
20,79,000;
Value of Firm's Goodwill—₹ 10,00,000; Cash at Bank—₹ 8,59,000.]
72. Deepika and Rajshree are partners in a firm sharing profits and losses in the ratio of 3 : 2.
On 31st March, 2023, their Balance Sheet was:

Liabilities ₹ Assets ₹

Sundry Creditors 16,000 Cash in Hand 1,200

Public Deposits 61,000 Cash at Bank 2,800

Bank Overdraft 6,000 Stock 32,000

Outstanding Liabilities 2,000 Prepaid Insurance 1,000

Capital A/cs: Sundry Debtors 28,800

Deepika 48,000 Less: Provision for Doubtful Debts 800 28,000

Rajshree 40,000 88,000 Plant and Machinery 48,000

Land and Building 50,000

Furniture 10,000

1,73,000 1,73,000

On 1st April, 2023, the partners admit Anshu as a partner on the following terms:
(a) New profit-sharing ratio of Deepika, Rajshree and Anshu will be 5 : 3 : 2.
(b) Anshu shall bring in ₹ 32,000 as his capital.
(c) Anshu is unable to bring his share of goodwill. Partners, therefore, decide to calculate the
goodwill on the basis of Anshu's share in the profits and the capital contribution made by her
to the firm.
(d) Plant and Machinery is to be valued at ₹ 60,000, Stock at ₹ 40,000 and the Provision for
Doubtful Debts is to be maintained at ₹ 4,000. Value of Land and Building has appreciated by
20%. Furniture has been depreciated by 10%.
(e) There is an additional liability of ₹ 8,000 being outstanding salary payable to employees of
the firm. This liability is not included in the outstanding liabilities, stated in the above Balance
Sheet. Partners decide to show this liability in the books of account of the reconstituted firm.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of Deepika,
Rajshree and Anshu.
[Ans.: Hidden Goodwill—₹ 22,200; Gain (Profit) on Revaluation—₹ 17,800; Partners' Capital
A/cs:
 Deepika—₹ 60,900; Rajshree—₹ 49,340; Anshu—₹ 32,000; Anshu's Current A/c—₹ 4,440
(Dr.);
Bank Balance—₹ 28,800; Balance Sheet Total—₹ 2,29,240.]
[Hints: 1. Adjustment of Goodwill:
Dr. Anshu's Current A/c by ₹ 4,440;
Cr. Depika's Capital A/c by ₹ 2,220 and Rajshree's Capital A/c by ₹ 2,220.
2. Bank Balance: ₹ 2,800 + ₹ 32,000 - ₹ 6,000 (Bank Overdraft) = ₹ 28,800.]
73. Sunaina and Tamanna are partners in a firm sharing profits and losses in the ratio of 3 :
2. Their Balance Sheet as at 31st March, 2020 stood as follows:

Liabilities ₹ Assets ₹

Capital A/cs: Plant and Machinery 1,20,000

Sunaina 60,000 Land and Building 1,40,000

Tamanna 80,000 1,40,000 Debtors 1,90,000

Current A/cs: Less: Provision for Doubtful 40,000 1,50,000

Debts

Sunaina 10,000 Stock 40,000

Tamanna 30,000 40,000 Cash 30,000

General Reserve 1,20,000 Goodwill 20,000

Workmen Compensation
Reserve 50,000

Creditors 1,50,000

5,00,000 5,00,000

They agreed to admit Pranav into partnership for 1 /5th share of profits on 1st April, 2020, on
the following terms:
(a) All Debtors are good.
(b) Value of Land and Building to be increased to ₹ 1,80,000.
(c) Value of Plant and Machinery to be reduced by ₹ 20,000.
(d) The liability against Workmen’s Compensation Fund is determined at ₹ 20,000 which is to
be paid later in the year.
(e) Anil, to whom ₹ 40,000 were payable (already included in above creditors), drew a bill of
exchange for 3 months which was duly accepted.
(f) Pranav to bring in capital of ₹ 1,00,000 and ₹ 10,000 as premium for goodwill in cash.
Journalise. (CBSE Sample Paper 2020)
[Ans.: Gain on Revaluation—₹ 60,000; Sacrificing Ratio—3:2.]
74. Following is the Balance Sheet of Jay and Veeru as at 31st March, 2023 who are partners
in a firm sharing profits and losses in the ratio of 3 : 2 respectively:
Liabilities ₹ Assets ₹

Creditors 45,000 Cash at Bank 15,000

General Reserve 36,000 Debtors 60,000

Less: Provision for Doubtful

Capital A/cs: Debts 2,400 57,600

Jay 1,80,000 Patents 44,400

Veeru 90,000 2,70,000 Investments 24,000

Current A/cs: Fixed Assets 2,16,000

Jay 30,000 Goodwill 30,000

Veeru 6,000 36,000

3,87,000 3,87,000

Sri is admitted as a new partner on 1st April, 2023 on the following terms:
(a) Provision for doubtful debts is to be maintained at 5% on Debtors.
(b) Outstanding rent payable was ₹ 15,000.
(c) An accrued income of ₹ 4,500 does not appear in the books of the firm. It is now to be
recorded.
(d) Jay takes over the Investments at an agreed value of ₹ 18,000.
(e) New Profit-sharing Ratio of partners will be 4 : 3 : 2.
(f) Sri will bring in ₹ 60,000 as his capital by cheque.
(g) Sri is to pay an amount equal to his share in firm's goodwill valued at twice the average
profit of the last three years ended 31st March, 2023, 2022 and 2021, which were ₹ 90,000; ₹
78,000 and ₹ 75,000 respectively.
(h) Half of the amount of goodwill is to be withdrawn by Jay and Veeru.
You are required to pass Journal entries, prepare Revaluation Account, Partners' Capital and
Current Accounts and the Balance Sheet of the new firm.
[Ans.: Loss on Revaluation—₹ 17,100; Partners' Capital A/cs: Jay—₹ 1,80,000; Veeru—₹
90,000 and Sri—₹ 60,000; Partners' Current A/cs: Jay—₹ 17,940; Veeru—₹ 6,960; Balance
Sheet Total—₹ 4,14,900.)

75. X and Y are partners. They admit Z as a partner and new profit sharing ratio is agreed at
3 : 2 : 1. Z brings in Capital of ₹ 1,50,000 and ₹40,000 as premium for goodwill in Cash.
Their Balance Sheet was as follows :

Liabilities ₹ Assets ₹

Creditors 40,000 Cash and Bank 44,000

Capital Accounts : Debtors 2,00,000

X 4,00,000 Less : Provision 14,000 1,86,000

Y 2,50,000 6,50,000 Stock 2,50,000

Current Accounts : Machinery 1,20,000

X 30,000 Building 2,00,000

Y 10,000 40,000

Workmen Compensation Reserve 70,000

8,00,000 8,00,000

The assets and liabilities are revalued as under :

(i) Provision for Doubtful Debts is found in excess by ₹4,000.
(ii) Building was found under valued by 20% and Machinery overvalued by 20%.
(iii) Part of the stock which had been included at a cost of ₹ 10,000 had been badly damaged
in storage and could only expect to realise ₹2,000.
(iv) Creditors were written off ₹6,000.
Pass necessary journal entries.
[Ans. Profit on Revaluation ₹32,000 be credited to X and Y in equal propor

76. Atul and Amit are partners sharing profits in the ratio of 3 : 2. Their Balance ₹
Sheet as at 31st March, 2023 is as follows:

Liabilities ₹ Assets ₹

Capital A/cs: Plant and Machinery 1,80,000

Atul 1,00,000 Furniture 30,000

Amit 1,00,000 2,00,000 Computer 10,000

Current A/cs: Stock 40,000

Atul 70,000 Debtors 50,000

Amit 50,000 1,20,000 Bills Receivable 10,000

Creditors 40,000 Cash 10,000

Bills Payable 10,000 Bank 40,000

3,70,000 3,70,000

Abhay is admitted as a partner for 1 /4th share on 1st April, 2023 on the following
terms:
(a) Abhay is to bring ₹ 65,000 as capital after adjusting amount due to him included
in creditors and his share of Goodwill.
(b) ₹ 10,000 included in creditors is payable to Abhay which is to be transferred to
his Capital Account.
(c) Furniture is to be reduced by ₹ 3,000 and Plant and Machinery is to be increased
to ₹ 1,98,000.
(d) Stock is overvalued by ₹ 4,000.
(e) A Provision for Doubtful Debts is to be created @ 5%.
(f) Goodwill is to be valued at 2 years' purchase of average profit for four years.
Profits of four years ended 31st March, were as follows: 2023—₹ 25,000, 2022—₹
10,000, 2021—₹ 2,500, and 2020— ₹ 2,500.
Pass the Journal entries for the above arrangement.
[Ans.: Gain on Revaluation—₹ 8,500; Value of Goodwill—₹ 20,000;
Share of Abhay—₹ 5,000; Sacrificing Ratio—3:2.]
77. A and B are partners in a firm. Net profit of the firm is divided as follows: 1/2 to
A, 1/3 to 6 and 1/6 carried to a Reserve. They admit C as a partner on 1st April,
2023 on which date, the Balance Sheet of the firm was:

Liabilities ₹ Assets ₹

Capital A/cs: Building 50.000

A 50,000 Plant and Machinery 30.000

B 40,000 90,000 Stock 18,000

Reserve 10,000 Debtors 22,000

Creditors 20,000 Bank 5,000

Outstanding Expenses 5,000

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.
[Ans.: Loss on Revaluation—₹ 1,200; Partners’ Capital A/cs: A—₹ 58,280;
B—₹ 45,520; C—₹ 25,000; Balance Sheet Total—₹ 1,53,000.]
 [Hint: Value of Stock: ₹ 20,000 {i.e., ₹ 18,000 x 100/90); Debtors: ₹ 18,000;
Creditors ₹ 19,200.]
Q. 78. (HOTS) A and B are partners in a firm. Their Balance Sheet as at 31st March,
2022 was as follows :

Liabilities ₹ Assets ₹

Capital : Cash 10,000

A 50,000 Sundry Debtors 80,000

B 60,000 Stock 20,000

Creditors 15,000 Fixed Assets 38,600

Outstanding Exp. 3,000 P & L A/c 4,000

Insurance Fund 7,000

Provident Fund 1,000

Employees Saving Fund 5,000

Workmen Profit Sharing Fund 2,000

Workmen Compensation 5,600

Reserve

Provision for Doubtful Debts 4,000

1,52,600 1,52,600

C was taken into partnership as from 1-4-2018 on following tenns for 1/6 share :
1. C will bring ₹40,000 as his capital.
2. Goodwill is valued at ₹ 12,000 and admitting partner is unable to bring his share
of goodwill in cash.
3. Claim an account of Workmen’s Compensation is ₹3,000.
4. Creditors are to be paid ₹2,000 more.
5. 2% Provision for Discount on Debtors is required.
1
6. The share of A in new firm will be 12 times of B.
Prepare Revaluation A/c, Capital Accounts and Balance Sheet.
SOLUTION :
Dr. REVALUATION ACCOUNT Cr.

Particulars ₹ Particulars ₹

To Creditors 2,000 By Loss transferred to :

To Provision for Discount(1) 1,520 A’s Capital A/c 1,760

 B’s Capital A/c 1,760 3,520

3,520 3,520

Dr. PARTNER’S CAPITAL ACCOUNTS Cr.

Particulars A B C Particulars A B C

₹ ₹ ₹ ₹ ₹ ₹

To P & L A/c 2,000 2,000 By Balance b/d 50,000 60,000

To Revaluation 1,760 1,760 By Insurance 3,500 3,500

Fund

To Balance c/d 51,040 63,040 40,000 By Workmen

Compensation

Reserve 1,300 1,300

By C’s Current
A/c
1 2,000
(6 of 12,000)

By Cash 40,000

54,800 66,800 40,000 54,800 66,800 40,000

BALANCE SHEET
as at 1st April, 2022

Liabilities ₹ Assets ₹

Capitals : Cash 50,000

A 51,040 Sundry Debtors 80,000

B 63,040 Stock 20,000

C 40,000 1,54,080 Fixed Assets 38,600

Creditors 17,000 C’s Current A/c 2,000

Outstanding Expenses 3,000

Provident Fund 1,000

Employee’s Saving Fund 5,000

Workmen Profit Sharing Fund 2,000

Provision for Workmen

Compensation Claim 3,000 J

Provision for Doubtful Debts 4,000

Provision for Discount on 1,520

Debtors

1,90,600 1,90,600

Notes :
(1) Provision for Discount will be 2% on (₹80,000 - Provision for Doubtful Debts
₹4,000)
(2) New Profit Sharing Ratio :
1
C is admitted for th share.
6
5 1
Balance 6th will be shared by A and B in the ratio of 12 : 1 OR 3 : 2
5 3 3
Hence, A’s share : × =
6 5 6
5 2 2
B’s share : × =
6 5 6
1
C’s share : = 6
Sacrificing Ratio :
1 3
A: − =0
2 6
1 2 1
B : 2−6 = 6
Hence, only B has sacrificed.

Capital adjustments :
79. X and Y are partners sharing profits in the ratio of 2 : 1. Their Balance Sheet as at 31st
March, 2023 was:

Liabilities ₹ Assets ₹

Sundry Creditors 25,000 Cash/Bank 5,000

General Reserve 18,000 Sundry Debtors 15,000

Capital A/cs: Stock 10,000

X 75,000 Investments 8,000

Y 62,000 1,37,000 Printer 5,000

Fixed Assets 1,37,000

1,80,000 1,80,000
They admit Z into partnership on 1st April, 2023 on the following terms:
(a) Z brings in ₹ 40,000 as his capital and he is given 1 /4th share in profits.
(b) Z brings in ₹ 15,000 for goodwill, half of which is withdrawn by old partners.
(c) Investments are valued at ₹ 10,000. X takes over Investments at this value.
(d) Printer is to be reduced (depreciated) by 20% and Fixed Assets by 10%.
(e) An unrecorded stock on 31st March, 2023 is ₹ 1,000.
(f) By bringing in or withdrawing cash, the Capitals of X and Y are to be made proportionate
to that of Z on their profit-sharing basis.
Pass Journal entries, prepare Revaluation Account, Capital Accounts and new Balance Sheet
of the firm.
[Ans.: Loss on Revaluation—₹ 11,700; Capital A/cs: X—₹ 80,000; Y—₹ 40,000; Z—₹
40,000; Cash/Bank Balance—₹ 31,700; Balance Sheet Total—₹ 1,85,000; X brings in—₹
5,800; Y withdraws—₹ 26,600.]
Q. 80. Rajat and Ravi are partners in a firm sharing profits and losses in the ratio of 7 : 3. Their
Balance Sheet as at 31st March, 2021 is as follows :

Liabilities ₹ Assets ₹

Creditors 60,000 Cash in hand 36,000

Reserve 10,000 Cash at Bank 90,000

Capital Accounts : Debtors 44,000

Rajat 1,00,000 Furniture 30,000

Ravi 80,000 1,80,000 Stock 50,000

2,50,000 2,50,000

On 1st April, 2021, they admit Rohan on the following terms :

(i) Goodwill is valued at ₹40,000 and Rohan is to bring in the necessary amount in cash as
premium for goodwill and ₹60,000 as Capital for 1/4 share in profits.
(ii) Stock is to be reduced by 40% and furniture is to be reduced to 40%.
(iii) Capitals of the partners shall be proportionate to their Profit Sharing Ratio taking Rohan’s
Capital as base. Adjustments of Capitals to be made by cash.
Requirements : Prepare Revaluation Account, Partner’s Capital Accounts and Cash Account.
[Ans. Loss on Revaluation ₹38,000; New Ratio 21 : 9 : 10; Capital Accounts Rajat ₹ 1,26,000;
Ravi ₹54,000 and Rohan ₹60,000; Deficit Capital brought in by Rajat in Cash ₹38,600; Surplus
Capital returned to Ravi in Cash ₹20,600. Balance of Cash A/c ₹ 1,24,000.]

Q. 81.. Ashok and Biju were partners sharing profits and losses in the ratio of 3 : 1 respectively.
The following was their balance sheet as at 31 st March, 2022:

Liabilities ₹ Assets ₹

Creditors 1,20,000 Sundry Debtors 2,00,000

Bank Overdraft 1,50,000 Stock 2,20,000

Ashok’s Capital 1,50,000 Furniture 40,000

Biju’s Capital 1,00,000 Machinery 60,000

5,20,000 5,20,000

On 1st April, 2022, Chandra was admitted to the firm on the following terms :
(i) Chandra would provide ₹ 1,00,000 as a capital and pay ₹20,000 as goodwill for his one-
third share in future profits.
(ii) Ashok, Biju and Chandra would share profits equally.
(iii) Machinery' would be reduced by 10% and ₹5,000 would be provided for bad debts. Stock
would be valued at ₹2,49,400.
(iv) Capital accounts of old partners would be adjusted in the profit sharing ratio on the basis
of Chandra’s capital by bringing in or taking out cash.
Pass necessary journal entries and prepare partner’s capital accounts and balance sheet of
the new firm,
[Ans. Profit on Revaluation ₹ 18,400; Final Capitals ₹ 1,00,000 each; Ashok withdraws
₹88,800 and Biju brings in ₹400; Bank overdraft balance ₹ 1,18,400; Balance Sheet Total
₹5,38,400.]
5 1
Hint: Ashok sacrifices 12; Biju Gains 12.
1
Chandra’s 3 share of goodwill = ₹20,000. Hence, total Goodwill = ₹20,000 × 3 = ₹60,000.
1
Biju has to compensate of 60,000 i.e. ₹5,000 to Ashok by way of goodwill.
12

Entry for Goodwill :

Premium for Goodwill A/c Dr. 20,000
Biju’s Capital A/c Dr. 5,000
To Ashok’s Capital A/c 25,000
82. A and 6 were partners sharing profits and losses in the ratio of 3 : 2. Their Balance Sheet
as at 31 st March, 2018, was as follows:
BALANCE SHEET OF A AND B as at 31st March, 2018

Liabilities ₹ Assets ₹

Capitals: Cash 8,000

A 1,04,000 Sundry Debtors 37,600

Less: Provision for Doubtful

B 52,000 1,56,000 Debts 1,600 36,000

Creditors 1,54,000 Stock 60,000

Employees' Provident Fund 16,000 Prepaid Insurance 6,000

Workmen Compensation Plant and Machinery 76,000
Reserve 10,000

Contingency Reserve 10,000 Building 1,40,000

Furniture 20,000

3,46,000 3,46,000

C was admitted as a new partner and brought ₹ 64,000 as capital and ₹ 15,000 for his share
of goodwill premium. The new profit-sharing ratio was 5 : 3 : 2. On C's admission the following
was agreed upon:
(i) Stock was to be depreciated by 5%.
(ii) Provision for doubtful debts was to be made at ₹ 2,000.
(iii) Furniture was to be depreciated by 10%.
(iv) Building was valued at ₹ 1,60,000.
(v) Capitals of A and B were to be adjusted on the basis of C’s capital by bringing or paying of
cash as the case may be.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of
reconstituted firm. (CBSE2019)
[Ans.: Gain (Profit) on Revaluation = ₹ 14,600; Capital Accounts: A—₹ 1,60,000; B—₹
96,000;
C—₹ 64,000: A will bring cash of ₹ 27,740; B will bring ₹ 22,660;
Cash Balance = ₹ 1,37,400; Balance Sheet Total—₹ 4,90,000]
Q. 83. Balance Sheet as at 31st March, 2021 of Ramesh, Kumar and Pappu who were sharing
profits and losses in the ratio of 2 : 3 : 5.

Liabilities ₹ Assets ₹

Capitals: Cash 18,000

Ramesh 36,000 Bills Receivable 24,000

Kumar 44,000 Furniture 28,000

Pappu 52,000 Stock 44,000

Creditors 64,000 Debtors 42,000

Bills Payable 32,000 Investments 32,000

Profit & Loss A/c 14,000 Machinery 34,000

Goodwill 20,000

2,42,000 2,42,000

On 1st April, 2021 they admit Shilpa into partnership on the following terms :
1. Furniture, Investments and Machinery to be reduced by 15%.
2. The value of stock to be taken at ₹48,000.
3. Shilpa will bring in ₹26,000 as her share of goodwill.
4. Shilpa to bring ₹32,000 towards capital for l/6th share and old partners to adjust their
capitals accordingly.
5. Outstanding rent amounted to ₹ 1,800.
6. Prepaid salaries ₹800.
7. Adjustments of capitals to be made by cash.
Prepare Revaluation Account, Capital Accounts, Cash Account and the Balance Sheet of the
new firm.
[Ans. Loss on Revaluation ₹ 11,100; Capital Accounts : Ramesh ₹32,000; Kumar ₹48,000;
Pappu ₹80,000 and Shilpa ₹32,000; Cash balance ₹95,100; B/S Total ₹2,89,800; Ramesh
withdraws ₹5,780; Kumar brings in ₹ 1,330 and Pappu brings in ₹23,550.]
Q. 84. A and B share profits in the ratio of 2 : 1. Their balance sheet as at 31 st March, 2021
was as follows :

Liabilities ₹ Assets ₹

Provision for Doubtful Debts 800 Cash at Bank 6,000

Bank Overdraft 24,000 Sundry Debtors 20,000

Sundry Creditors 25,200 Stock 40,000

Capitals: A 60,000 Building 66,000

B 40,000 1,00,000 P & L Account 18,000

1,50,000 1,50,000

C is admitted into partnership on 1st April, 2021 on the following terms :

(i) New profit sharing ratio will be 4 : 3 : 2 and C will pay ₹40,000 as his capital.
(ii) Goodwill of the firm is valued at ₹45,000 but C is unable to bring any amount for goodwill.
(iii) The provision for doubtful debts is to be raised to ₹2,000.
(iv) Stock be depreciated by ₹5,000.
(v) Provision be made for outstanding expenses amounting to ₹2,800.
(vi) Capitals of A and B be adjusted on the basis of new partner’s capital and the actual cash
to be paid off or brought in, as the case may be.
Prepare Journal entries, capital accounts, and the opening Balance Sheet of the new firm.
[Ans. Loss on Revaluation ₹9,000; Capital Accounts A ₹80,000; B ₹60,000 and C ₹40,000;
Cash at bank ₹79,000; A brings in ₹28,000 and B brings in ₹29,000; B/S Total ₹2,10,000.]
Hints : 1. Provision for Doubtful Debts will be shown in liabilities at ₹2,000.
2. Bank Overdraft will be adjusted from Cash at Bank.
3. C’s share of goodwill will be debited to his Current Account instead of his Capital Account.
Q. 85. A and B sharing profits in the ratio of 3 : 2 have capitals of ₹ 1,00,000 and ₹45,000
respectively. They admit a new partner C with 2/9th share of profits. C is required to bring
₹40,000 as capital. The loss on revaluation of assets and liabilities is ₹ 10,000. It is agreed
that capitals of partners should be in the new profit sharing ratio. Any excess or deficit amount
should be transferred to their current accounts. Pass a suitable adjusting entry or entries.

[Ans. I. A’s Capital A/c Dr. 10,000

To A’s Current A/c 10,000

II. B’s Current A/c Dr. 15,000

To B's Capital A/c 15,000]

Q. 86. On 31st March, 2021 the Balance Sheet of W and R who shared profits in 3 : 2 ratio
was as follows :

Liabilities ₹ Assets ₹

Creditors 20,000 Cash 5,000

Profit and Loss Account 15,000 Sundry Debtors 20,000

Capital Accounts : Less : Provision 700 19,300

W 40,000 Stock 25,000

R 30,000 70,000 Plant and Machinery 35,000

Plants 20,700

1,05,000 1.05,000

On 1st April, 2021 B was admitted as a partner on the following conditions :

(a) B will get 4/15th share of profits.
(b) B had to bring ₹30,000 as his capital to which amount other Partners capitals shall have to
be adjusted.
1
(c) He would pay cash for his share of goodwill which would be based on 22 years purchase
of average profits of past 4 years.
(d) The assets would be revalued as under :
Sundry debtors at book value less 5% provision for bad debts. Stock at ₹20,000, Plant and
Machinery at ₹40,000.
(e) The profits of the firm for the years 2018, 2019 and 2020 were ₹20,000; ₹ 14,000 and ₹
17,000 respectively.
Prepare Revaluation Account, Partner’s Capital Accounts and the Balance Sheet of the new
firm.
[Ans. Loss on Revaluation ₹300; New Ratio 33 : 22 : 20;, Capital Accounts : W ₹49,500, R
₹33,000 and 5 ₹30,000; Cash Balance ₹32,800; B/S Total ₹1,32,500; W withdraws ₹5,920
and R withdraws ₹7,280.]
20,000 + 14,000 + 17,000 + 15,000 (Given in Balance Sheet)
Hint: Average Profits = 4

= ₹ 16,500
 1
Value of Goodwill = ₹16,500 × 2 = ₹41,250
2
4
B's Share in Goodwill = ₹41,250 × 15 = ₹ 11,000
Q. 87. A and B are partners sharing profits in the ratio of 2 : 3. Their balance sheet as at 31 st
March, 2021 was as follows :

Liabilities ₹ Assets ₹

Bank Overdraft 32,000 Cash in Hand 3,000

Creditors 25,000 Cash at Bank 12,000

P & L Account 10,000 Debtors 40,000

Capitals : Less : Provision 5,000 35,000

A 1,00,000 Furniture 40,000

B 1,05,000 2,05,000 Building 80,000

Machinery 1,00,000

Investments 2,000

2,72,000 2,72,000

On 1st April, 2021 they admitted C for 1/5 share in profits which he acquires wholly from B.
The other terms of agreement were : -
(i) Goodwill of the firm was to be valued at two year’s purchase of the average of the last 3
year’s profits. The profit for the last 3 years were ₹58,000; ₹66,000 and ₹56,000 respectively.
(ii) Provision for Doubtful debts was found in excess by ₹2,000.
(iii) Buildings were found undervalued by ₹20,000 and furniture overvalued by ₹5,000,
(iv) ₹5,000 for damages claimed by a customer had been disputed by the firm. It was agreed
at ₹2,000 by a compromise between the customer and the firm.
(v) C was to bring in ₹60,000 as his capital and the necessary amount for his share of goodwill.
(vi) Capitals of A and B were to be adjusted in the new profit sharing ratio by opening
necessary current accounts.
Prepare journal entries, capital accounts and the opening balance sheet.
[Ans. Profit on Revaluation ₹ 15,000; Capitals A ₹ 1,20,000; B ₹ 1,20,000 and C ₹60,000;
Cash in Hand ₹3,000; Cash at Bank (after deducting bank overdraft) ₹64,000. B/S Total
₹3,51,000; New Ratio 2 : 2 : 1; A’s Current A/c ₹ 10,000 (Dr.); B’s Current A/c ₹24,000 (Cr.).]
Hint : No entry will be passed for ₹5,000. Only the following entry will be passed in respect of
damages :

Revaluation A/c Dr. 2,000

To Damages Payable A/c 2,000

Q. 88.. Abha. and Bimal are partners in a firm sharing profits and losses in the ratio of 3 : 2,
On 31st March, 2015 they admitted Chintu into partnership for 1/5th share in the profits of the
firm. On that date their Balance sheet stood as under :
BALANCE SHEET
as at 31st March, 2015

Liabilities Amount Assets Amount

₹ ₹

Capitals: Abha 1,20,000 Plant and Machinery 1,30,000

Bimal 1,00,000 2,20,000 Furniture 25,000

General Reserve 20,000 Investments 1,00,000

Sundry Creditors 1,00,000 Sundry Debtors 50,000

Bank 35,000

3,40,000 3,40,000

Chintu was admitted on the following terms :

(i) He will bring ₹80,000 as capital and ₹30,000 for his share of goodwill premium.
(ii) Paitners will share future profits in the ratio of 5 : 3 : 2.
(iii) Profit on revaluation of assets and reassessment of liabilities was ₹7,000.
(iv) After making adjustments, the Capital Accounts of the partners wjll be in proportion to
Chintu’s capital. Balance to be paid off or brought in by the old partners by cheque as the case
may be.
Prepare the Capital Accounts of the partners and Bank Account.
(C.B.S.E. 2016 Comptt., All India)
[Ans. Final Capitals : Abha ₹2,00,000, Bimal ₹ 1,20,000 and Chintu ₹80,000. Abha brings in
₹48,800 and Bimal withdraws ₹5,800. Bank balance ₹ 1,88,000]
Q. 89. Juliet and Rabani are partners in a firm, sharing profits and losses in-the ratio of 3 : 1.
On 31st March, 2016, their Balance Sheet was as under :
BALANCE SHEET OF JULIET AND RABANI
As at 31st March, 2016

Liabilities ₹ Assets ₹

Sundry Creditors 70,000 Plant and Machinery 1,76,000

General Reserve 30,000 Inventory 26,000

Provident Fund 40,000 Sundry Debtors 57,000

Capital A/cs Less : Provision for

Juliet 1,10,000 Doubtful

Rabani 90,000 2,00,000 Debts 3,000 54,000

Cash at Bank 68,000

Profit & Loss A/c 16,000

3,40,000 3,40,000
1
Mike was taken as a partner for 4
th share, with effect from 1st April, 2016, subject to the
following adjustments :
(a) Plant and Machinery was found to be overvalued by ₹ 16,000. It was to be shown in the
books at the correct value.
(b) Provision for Doubtful Debts was to be reduced by ₹2,000.
(c) Creditors included an amount of ₹2,000 received as commission from Malini. The
necessary adjustment was required to be made.
(d) Goodwill of the firm was valued at ₹60,000. Mike was to being in cash, his share of goodwill
along with his capital of ₹ 1,00,000.
(e) Capital Accounts of Juliet and Rabani were to be readjusted in the new profit sharing
arrangement on the basis of Mike’s capital, any surplus to be adjusted through current account
and any deficiency through cash.
You are required to prepare :
(i) Revaluation Account,
(ii) Partner’s Capital Accounts, and
(iii) Balance Sheet of the reconstituted firm. (I.S.C. 2017)
[Ans. Loss on Revaluation ₹ 12,000; Capital Accounts : Juliet ₹2,25,000 and Rabani ₹75,000;
Juliet brings in ₹ 1,02,250; Rabani’s Current Account (Cr.) ₹! 9,250; Cash at Bank ₹2,85,250,
B/S total ₹5,27,250.]
Q. 90. Chander and Damini were partners in a firm sharing profits and losses equally. On 31st
March, 2017 their Balance Sheet was as follows :
Balance Sheet of Chander and Damini as at 31.3.2017

Liabilities Amount Assets Amount

₹ ₹

Sundry Creditors 1,04,000 Cash at Bank 30,000

Capitals : Bills Receivable 45,000

Chander 2,50,000 Debtors 75,000

Damini 2,16,000 4,66,000 Furniture 1,10,000

Land and Building 3,10,000

5,70,000 5,70,000

On 1.4.2017, they admitted Elina as a new partner for 1/3rd share in the profits on the following
conditions :
(i) Elina will bring ₹3,00,000 as her capital and ₹50,000 as her share of goodwill premium, half
of which will be withdrawn by Chander and Damini.
(ii) Debtors to the extent of ₹5,000 were unrecorded.
(iii) Furniture will be reduced by 10% and 5% provision for bad and doubtful debts will be
created on bills receivables and debtors.
(iv) Value of land and building will be appreciated by 20%.
(v) There being a claim against the firm for damages, a liability to the extent of ₹8,000 will be
created for the same.
Prepare Revalution Account and Partners’ Capital Accounts. (C.B.S.E. 2018)
[Ans. Profit on Revaluation ₹41,750; Capital Accounts : Chander ₹2,83,375; Damini ₹2,49,375
and Elina ₹3,00,000.]
Q. 91. Sanjana and Alok were partners in a firm sharing profits and losses in the ratio 3 : 2.
On 31st March, 2018 their Balance Sheet was as follows :
BALANCE SHEET OF SANJANA AND ALOK
as at 31.3.2018

Liabilities Amount Assets Amount

₹ ₹

Creditors 60,000 Cash at Bank 1,66,000

Workmen’s Compensation Debtors 1,46,000

Reserve 60,000 Less : Provision for

Capitals : Doubtful debts 2,000 1.44,000

Sanjana 5,00,000 Stock 1,50,000

Alok 4,00,000 9,00,000 Investments 2,60,000

Furniture 3,00,000

10,20,000 10,20,000

On 1st April, 2018, they admitted Nidhi as a new partner for 1/4th share in the profits on the
following terms :
(a) Goodwill of the firm was valued at ₹4,00,000 and Nidhi brought the necessary amount in
cash for her share of goodwill premium, half of which was withdrawn by the old partners.
(b) Stock was to be increased by 20% and furniture was to be reduced to 90%.
(c) Investments were to be valued at ₹3,00,000. Alok took over investments at this value.
(d) Nidhi brought ₹3,00,000 as her capital and the capitals of Sanjana and Alok were adjusted
in the new profit sharing ratio.
Prepare Revaluation Account, Partners Capital Accounts and the Balance Sheet of the
reconstituted firm on Nidhi’s admission. (C.B.S.E. 2019, M.P.)
[Ans. Profit on Revaluation ₹40,000; Capital A/cs : Sanjana ₹5,40,000; Alok ₹3,60,000 and
Nidhi ₹3,00,000; Sanjana withdraws ₹50,000 and Alok brings in ₹2,00,000; Balance Sheet
Total ₹12,60,000.]
Q. 92. Ashish and Nimish were partners in a firm sharing profits and losses in the ratio of 3 :
2. On 31st March, 2019 their Balance Sheet was as follows :
BALANCE SHEET OF ASHISH AND NIMISH
as at 31st March, 2019

Liabilities ₹ Assets ₹

Capitals : Plant and Machinery 2,90,000

Ashish 3,10,000 Furniture 2,20,000

Nimish 2,90,000 6,00,000 Sundry Debtors 90,000

General Reserve 50,000 Less : Provision for

Workmen’s Compensation Doubtful Debts 1,000 89,000

Reserve 20,000 Stock 1,40,000

Creditors 1,10,000 Cash 41,000

7,80,000 7,80,000

On 1st April, 2019, Geeta was admitted into the partnership for l/4th share in the profits on the
following terms :
(i) Goodwill of the firm was valued at ₹2,00,000.
(ii) Geeta brought ₹3,00,000 as her capital and her share of goodwill premium in cash.
(iii) Bad debts amounted to ₹2,000. Create a provision for doubtful debts @ 5% on Sundry
debtors.
(iv) Furniture was found undervalued by ₹65,400.
(v) Stock was taken over by Nimish for ₹ 1,30,000.
(vi) The liability against workmen’s compensation reserve was determined at ₹30,000.
(vii) After the above adjustments, the capitals of Ashish and Nimish were to be adjusted taking
Geeta’s capital as the base. Excess or shortage was to be adjusted by opening current
accounts.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the firm
after Geeta’s admission. (C.B.S.E. 2020, Rajasthan)
[Ans. Profit on Revaluation ₹40,000; Capital Accounts : Ashish ₹5,40,000; Nimish ₹3,60,000
and Geeta ₹3,00,000; Current Accounts : Ashish (Dr.) ₹ 1,46,000 and Nimish (Dr.) ₹ 1,44,000.
Balance Sheet Total ₹ 13,40,000.]
Q. 93. (HOTS) D and E were partners in a firm sharing profits in 3 : 1 ratio. On 1-4-2022 they
admitted F as a new partner for 1/4th share in the firm which he acquired from D. Their Balance
Sheet as at that date was as follows :

Liabilities ₹ Assets ₹
Creditors 54,000 Land and Building 50,000

Capitals : Machinery 60,000

D 1,00,000 Stock 15,000

E 70,000 1,70,000 Debtors 40,000

General Reserve 32,000 Less : Provision for

bad debts 3,000 37,000

Investments 50,000

Cash 44,000

2,56,000 2,56,000

F will bring ₹40,000 as his capital and the other terms agreed upon were :
(i) Goodwill of the firm was valued at ₹24,000.
(ii) Land and Building were valued at ₹70,000.
(iii) Provision for bad debts was found to be in excess by ₹800.
(iv) A liability for ₹2,000 included in creditors was not likely to arise.
(v) The capital of the partners be adjusted on the basis of F's contribution of capital to the firm.
(vi) Excess or shortfall, if any, to be transferred to current accounts.
Prepare Revaluation Account, Partner’s Capital Accounts and the Balance Sheet of the new
firm.
[Ans. Profit on Revaluation ₹22,800; Capital Accounts : D ₹80,000; E ₹40,000 and F ₹40,000;
D’s Current A/c ₹67,100 (Cr.); E’s Current A/c ₹43,700 (Cr.); Cash Balance ₹84,000; Balance
Sheet Total ₹3,22,800.]
Hint: F’s share of goodwill will be debited to his Current Account instead of his Capital Account.
Entry for Goodwill will be :
1 Dr. 6,000
F’s Current A/c (24,000 × 4)

To D’s Capital A/c 6,000

Q. 94. (HOTS) A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2.
Their balance sheet as at 1st April, 2022 was as follows :
BALANCE SHEET

Liabilities ₹ Assets ₹

Sundry Creditors 15,000 Plant 30,000

Capital Accounts : Patents 10,000

A 30,000 Stock 20,000

B 25,000 55,000 Debtors 18,000

General Reserve 10,000 Cash 2,000

80,000 80,000

C is admitted as partner on the above date on the following terms :

(i) He will pay ₹ 10,000 as goodwill for one-fourth share in the profits of the firm.
(ii) The assets are to be valued as under :
Plant at ₹32,000; Stock at ₹18,000; Debtors at book figure less a provision of 5 per cent for
Bad Debts.
(iii) It was found that the creditors included a sum of ₹ 1,400 which was not to be paid. But it
was also found that there was a liability for compensation to workers amounting to ₹2,000.
(iv) C was to introduce ₹20,000 as capital and the capitals of other partners were to be
adjusted in the new profit sharing ratio. For this purpose, current accounts were to be opened.
Give Journal entries to record the above and Balance Sheet after C’s admission. (Ledger
accounts are not required)
[Ans. Loss on Revaluation ₹ 1,500; New Ratio 9:6:5. Capital A/cs : A ₹36,000; B ₹24,000; C
₹20,000; Current A/cs : A ₹5,100 (Cr); B ₹8,400 (Cr); Cash Balance ₹32,000; Balance Sheet
total ₹ 1,09,100.]
Q. 95. (HOTS) The following was the Balance Sheet of Ram, Shyam and Mohan sharing
6 5 3
profits and losses in the proportion of 14 : 14 : 14 respectively :
BALANCE SHEET

Liabilities ₹ Assets ₹

Creditors 18,900 [.and & Buildings 50,400

Bills Payable 6,300 Furniture 7,350

Reserve 7,000 Stock 29,400

Capital Accounts : Debtors 26,460

Ram 39,900 Cash at Bank 8,890

Shyam 33,600

Mohan 16,800 90,300

1,22,500 1,22,500

They agreed to take Sohan into partnership and give him 1/8th share of profits on the following
terms :
(a) That Sohan brings in ₹ 16,000 as his Capital.
(b) That Furniture be written down by ₹920 and stock be depreciated by 10%.
(c) That a Provision of ₹ 1,320 be made for outstanding repair bills.
(d) That the value of Land and Buildings be written upto ₹65,100.
(e) That Sohan’s share of Goodwill be fixed at ₹8,820. Sohan brings this amount in Cash.
(f) That the Capitals of Ram, Shyam and Mohan be adjusted on the basis of Sohan’s Capital
by opening the necessary Current Accounts.
Give the Necessary Journal Entries, the Revaluation Account, Capital Accounts and also the
Balance Sheet of the firm as newly constituted.
[Ans. Profit on revaluation ₹9,520; Capital A/cs : Ram ₹48,000; Shyam ₹40,000; Mohan
₹24,000; Sohan ₹ 16,000; Current A/cs : Ram ₹2,760 (Cr.); Shyam ₹2,650 (Cr.); Mohan ₹
1,770 (Dr.); Bank Balance ₹33,710; Balance Sheet total ₹ 1,59,930. New Profit Sharing Ratio
6 : 5 : 3 : 2.]
Q. 96. Om, Ram and Shanti were partners in a firm sharing profits in the ratio of 3 : 2 : 1. On
1st April, 2014 their Balance Sheet was as follows :

Liabilities Amount Assets Amount

₹ ₹

Capital Accounts : Land and Building 3,64,000

Om 3,58,000 Plant and Machinery 2,95,000

Ram 3,00,000 Furniture 2,33,000

Shanti 2,62,000 9,20,000 Bills Receivables 38,000

General Reserve 48,000 Sundry Debtors 90,000

Creditors 1,60,000 Stock 1,11,000

Bills Payable 90,000 Bank , 87,000

12.18,000 12,18,000

On the above date Hanuman was admitted on the following terms :

(i) He will bring ₹ 1,00,000 for his capital and will get 1/lOth share in tire profits.
(ii) He will bring necessary cash for his share of goodwill premium. The goodwill of the firm
was valued at ₹3,00,000.
(iii) A liability of ₹1 8,000 will be created against bills receivables discounted.
(iv) The value of stock and furniture will be reduced by 20%,
(v) The value of land and building will be increased by 10%.
(vi) Capital accounts of the partners will be adjusted on the basis of Hanuman’s capital in their
profit sharing ratio by opening current accounts.
Prepare Revaluation Account and Partners’ Capital Accounts.
(C.B.S.E. 2015)
[Ans. Loss on Revaluation ₹50,400; Capital Accounts Om ₹4,50,000; Ram ₹3,00,000; Shanti
₹1,50,000 and Hanuman ₹ 1,00,000; Om’s Current A/c ₹ 78,200 (Dr.); Ram’s Current A/c
₹9,200 (Cr.); Shanti’s Current A/c ₹ 1,16,600 (Cr.)]
Q 97. X and Y were partners in the profit-sharing ratio of 3 : 2. Their balance sheet as at 31st
March, 2022 was as follows:
 BALANCE SHEET as at 31st March, 2022

Liabilities ₹ Assets ₹

Creditors 56,000 Plant and Machinery 70,000

General Reserve 14,000 Buildings 98,000

Capital A/cs: Stock 21,000

X 1,19,000 Debtors 42,000

Y 1,12,000 2,31,000 Less: Provision 7,000 35,000

Cash in Hand 77,000

3,01,000 3,01,000

Z was admitted for 1 /6th share on the following terms:

(i) Z will bring ₹ 56,000 as his share of capital, but was not able to bring any amount to
compensate the sacrificing partners.
(ii) Goodwill of the firm is valued at ₹ 84,000.
(iii) Plant and Machinery were found to be undervalued by ₹ 14,000 Building was to brought
up to ₹ 1,09,000.
(iv) All debtors are good.
(v) Capitals of X and Y will be adjusted on the basis of Z's share and adjustments will be done
by opening necessary current accounts.
You are required to prepare Revaluation Account and Partners' Capital Accounts. (CBSE
Sample Paper 2023)
[Ans.: Gain on Revaluation—₹ 32,000; Partners' Capital Accounts: X—₹ 1,68,000; Y—₹
1,12,000;
Z—₹ 56,000; X's Current A/c (Dr.)—₹ 13,000; Y's Current A/c (Cr.)—₹ 24,000.]
[Hint: 'All Debtors are good' means Provision for Doubtful Debts is no longer required hence,
should be credited to Revaluation Account.]
98. Badal and Bijli were partners in a firm sharing profits in the ratio of 3 : 2. Their Balance
Sheet as at 31st March, 2019 was as follows:
BALANCE SHEET OF BADAL AND BIJLI as at 31st March, 2019

Liabilities ₹ Assets ₹

Capital A/cs: Building 1,50,000

Badal 1,50,000 Investments 73,000

Bijli 90,000 2,40,000 Stock 43,000

Badal's Current A/c 12,000 Debtors 20,000

Investment Fluctuation
Reserve 24,000 Cash 22,000

Bills Payable 8,000 Bijli's Current A/c 2,000

Creditors 26,000

3,10,000 3,10,000

Raina was admitted on the above date as a new partner for 1 /6th share in the profits of the
firm. The
terms of agreement were as follows:
(i) Raina will bring ₹ 40,000 as her capital and capitals of Badal and Bijli will be adjusted on
the basis of Raina's capital by opening Current Accounts.
(ii) Raina will bring her share of goodwill premium for ₹ 12,000 in cash.
(iii) The building was overvalued by ₹ 15,000 and stock by ₹ 3,000.
(iv) A provision of 10% was to be created on debtors for bad debts.
Prepare the Revaluation Account and Current and Capital Accounts of Badal, Bijli and Raina.
(CBSE 2020)
[Ans.: Loss on Revaluation—₹ 20,000; Partners' Capital A/cs: Badal—₹ 1,20,000; Bijli—₹
80,000 and Raina—₹ 40,000; Partners' Current A/cs: Badal—₹ 51,600 (Cr.); Bijli—₹ 14,400
(Cr.).]
99. Gautam and Yashica are partners in a firm, sharing profits and losses in 3 : 1 respectively.
The Balance Sheet of the firm as on 31st March, 2018 was as follows:
BALANCE SHEET as at 31st March, 2018

Liabilities ₹ Assets ₹

Sundry Creditors 50,000 Furniture 60,000

Bills Payable 30,000 Stock 1,40,000

Capitals: Debtors 80,000

Gautam 4,00,000 Cash in Hand 90,000

Yashica 1,00,000 5,00,000 Machinery 2,10,000

5,80,000 5,80,000

Asma is admitted as a partner for 3/8th share in the profits with a capital of ₹ 2,10,000 and ₹
50,000 for her share of goodwill. It was decided that:
(i) New profit-sharing ratio will be 3 : 2 : 3.
(ii) Machinery will be depreciated by 10% and Furniture by ₹ 5,000.
(iii) Stock was revalued at ₹ 2,10,000.
(iv) Provision for doubtful debts is to be created at 10% of debtors.
(v) The capitals of all the partners were to be in the new profit-sharing ratio on basis of capital
of new partner. Any adjustment to be done through Current Accounts.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the new
firm. (CBSE Sample Paper 2019)
[Ans.: Gain (Profit) on Revaluation = ₹ 36,000. Partners' Capital Accounts: Gautam—₹
2,10,000;
Yashica—₹ 1,40,000; Asma—₹ 2,10,000; Balance Sheet Total—₹ 9,07,000.]
[Hint: As only Gautam has sacrificed his share of profit, he will get premium for goodwill
brought by Asma.]

Calculation of the Capital Introduced by the New Partner

Q. 100. Nem and Khem sharing profits in the ratio of 3 : 2 admit Prem as a partner with 1/3
share in profits. He had to contribute proportionate capital. They had following financial
position :

Liabilities ₹ Assets ₹

Creditors 40,000 Cash at Bank 5,000

Reserve Fund 50,000 Debtors 60,000

Capitals : Stock 35,000

Nem 50,000 Plant and Machinery 80,000

Khem 40,000

1,80,000 1,80,000

They agreed to admit Prem as a partner on the following terms :

(1) Plant and Machinery to be reduced by 10%.
(2) Stock to be increased by ₹3,000.
(3) Bad debts provision was to be created at 5%.
(4) Accrued incomes not appearing in the books ₹900.
(5) Prem was to introduce ₹20,000 as premium for goodwill for 1/3rd share of the future profits
of the firm.
Prepare Profit and Loss Adjustment Account, Capital Accounts and Balance Sheet of the new
firm. Also calculate new profit sharing ratio.
[Ans. Loss on Revaluation ₹7,100; Capital Accounts : Nem ₹87,740; Khem ₹65,160 and Prem
₹76,450; Bank Balance ₹ 1,01,450; and Balance Sheet Total ₹2,69,350. New profit sharing
ratio 6 : 4 : 5.]
Hint: Calculation of Prem’s Capital :
2
Combined Capital of Nem and Khem for 3 share of Profits = 87,740 + 65,160 = ₹ 1,52,900
3
Therefore, the total Capital of the new firm will be = 1,52,900 × 2 = ₹2,29,350
1 1
Prem’s Capital for 3 rd share = 2,29,350 × 3 = ₹76,450.
Q. 101.Mohan and Sohan are in partnership sharing profits in the proportion of 3/5 and 2/5
respectively.
The Balance Sheet is as follows :

Liabilities ₹ Assets ₹

Capitals : Cash 65,000

Mohan 2,00,000 Debtors 1,00,000

Sohan 1,00,000 3,00,000 Less : Provision 40,000 60,000

Creditors 40,000 Stock 1,50,000

Plant 65,000

3,40,000 3,40,000

They decide to admit Rohan to 1/3rd share on the terms that he is to pay into the business ₹
1,00,000 as Goodwill and sufficient capital to give him 1/3rd share of the total capital of the
new firm. It was agreed that Provision for bad debts be reduced to ₹ 10,000, that the stock be
revalued at ₹2,00,000; and that the plant be reduced to ₹ 50,000.
Prepare necessary ledger accounts and show the balance sheet of the new partnership.
[Ans. Profit on Revaluation ₹65,000; Capital Accounts : Mohan ₹2,99,000; Sohan ₹ 1,66,000;
Rohan ₹2,32,500; Cash balance ₹3,97,500 and B/S total ₹7,37,500.]
Q. 102.X and Y were partners sharing profits in the ratio of 1 : 2. Their Balance Sheet as at
31 st March, 2018 was as follows :

Liabilities ₹ Assets ₹

Creditors 36,000 Cash 20,000

Outstanding Expenses 4,000 Debtors 40,000

Capitals : Less: Provision for

X 1,50,000 Bad Debts 500 39,500

Y 3,00,000 4,50,000 Stock 1,20,000

Furniture 30,000

Plant 2,72,500

Patents 8,000

4,90,000 4,90,000
1
They agreed to admit Z for 5 th share from 1st April, 2018 on the following terms:
(i) Goodwill of the firm was valued at ₹60,000 and Z to bring in his share of premium for
goodwill in cash.
(ii) Provision for bad debts be raised by ₹ 1,500.
(iii) Patents are valueless.
(iv) Stock be reduced by 10%.
(v) Outstanding expenses be increased by ₹6,000.
(vi) ₹2,500 be provided for an unforeseen liability.
1
(vii) Z to bring in Capital equal to 5th of the combined capital of X and Y.
Prepare Revaluation Account, Partner’s Capital Accounts and the Opening Balance Sheet.
[Ans. Loss on Revaluation ₹30,000; Capital A/cs : X ₹ 1,44,000; Y ₹2,88,000 and Z ₹86,400.
Cash Balance ₹1,18,400; B/S Total ₹5,66,900.]
Q. 103. Mohan and Mahesh were partners in a firm sharing profits in the ratio of 3 : 2. On 1st
April, 2021 they admitted Nusrat as a partner in the firm. The Balance Sheet of Mohan and
Mahesh on that date was as under :
BALANCE SHEET OF MOHAN AND MAHESH
as at 1st April, 2021

Liabilities Amount Assets Amount

₹ ₹

Creditors 2,10,000 Cash in hand 1,40,000

Workmen’s Compensation Fund 2,50,000 Debtors 1,60,000

General Reserve 1,60,000 Stock 1,20,000

Capitals : Machinery 1,00,000

Mohan 1,00,000 Building 2,80,000

Mahesh 80,000 1,80,000

8,00,000 8,00,000

It was agreed that:

(i) The value of Building is to be appreciated to ₹3,80,000.
(ii) Stock is undervalued by 25%.
(iii) The liability of workmen’s compensation fund was determined at ₹2,30,000.
(iv) Nusrat brought in her share of goodwill ₹ 1,00,000 in cash.
(v) Nusrat was to bring further cash as would make her capital equal to 20% of the combined
capital of Mohan and Mahesh after above revaluation and adjustments are carried out.
(vi) The future profit sharing ratio will be Mohan 2/5th, Mahesh 2/5th, Nusrat 1/5th.
Prepare Revaluation Account, Partner’s Capital Accounts and Balance Sheet of the new firm.
Also show clearly the calculation of capital brought by Nusrat.
[Ans. Profit on Revaluation ₹ 1,40,000; Capital Accounts : Mohan ₹3,92,000; Mahesh
₹2,08,000; Nusrat ₹ 1,20,000. B/S Total ₹11,60,000]
Hints:
 100
(i) Actual Value of Stock : 1,20,000 × = ₹ 1,60,000
75

(ii) Whole sacrifice is made by Mohan.

Q.104.. On 31st March 2019, the Balance Sheet of A and B, who were sharing profits in the
ratio of 3 : 2 was as follows :

Liabilities Amount Assets Amount

₹ ₹

Sundry Creditors 2,50,000 Cash at Bank 1.30,000

Investment Fluctuation Reserve 50,000 Sundry Debtors 7,50,000

Capitals : Less : Provision 30,000 7,20,000

A 10,00,000 Stock 4,50,000

B 8,00,000 18,00,000 Investments 2,00,000

Plant & Machinery 6,00,000

21,00,000 21,00,000
2 1
They decide to admit C as a partner. A sacrifices 15
from his share while B sacrifices 6
th of
his share in favour of C.
The following adjustments were agreed upon :
(i) C shall bring ₹ 1,50,000 as his share of goodwill premium and shall bring in proportionate
capital.
(ii) Stock was undervalued by 10% and Plant and Machinery was overvalued by 20%.
(iii) Market value of investments is ₹2,20,000.
(iv) Debtors to the extent of ₹ 10,000 were unrecorded.
(v) 5% provision for doubtful debts is required on sundry debtors.
Prepare Revaluation Account, Partner’s Capital Accounts and the Balance Sheet of the
reconstituted firm.
[Ans. Loss on Revaluation ₹28,000; Capital Accounts A ₹ 11,13,200; B ₹8,58,800 and C
₹4,93,000; Balance Sheet Total ₹27,15,000.]
Hints:

(i) Investments Fluctuation Reserve A/c Dr. 50,000

To A’s Capital A/c 30,000

To B's Capital A/c 20,000

(ii) investments A/c Dr. 20,000

To Revaluation A/c 20,000

(iii) Actual Value of Stock ₹5,00,000

(iv) Actual Value of Plant & Machinery ₹5,00,000
(v) Sacrificing Ratio 2 : 1
Q. 105. X and Y are partners in a firm. They share profits and losses in the ratio of 2:1. Their
Balance Sheet as at 31st March, 2023 stood as under :

Liabilities ₹ Assets ₹

Capitals : Plant and Machinery' 1,75,000

X 1,40,000 Furniture and Fixture 65,000

Y 1,00,000 Stock 35,000

Workmen Compensation Reserve 40,000 Bills Receivable 12,000

Creditors 1,50,000 Debtors 1,10,000

Bills Payable 10,000 Less : Provision for

Doubtful debts 7,000 1,03,000

Cash & Bank Balance 50,000

4,40,000 4,40,000
2 1
Z is admitted in the partnership. X surrenders th of his share and Y surrenders th of his
5 5
share in favour of Z. The following information is given about the firm :
(i) Plant and Machinery be reduced by ₹35,000 and furniture and fixture be reduced to ₹
58,500.
(ii) Provision for bad and doubtful debts is to be increased by ₹3,000.
(iii) Actual liability for workmen compensation claim is ₹ 16,000.
(iv) A liability of ₹2,500 included in creditors is not likely to arise.
(v) Z’s share of goodwill is valued at ₹40,000 but he is unable to bring it in cash.
(vi) Z is to bring in Capital proportionate to his share after all adjustments.
Prepare Revaluation Account, Capital Accounts and Balance Sheet after Z's admission. Also
calculate the new profit sharing ratio.
[Ans. Loss on Revaluation ₹42,000; Capital Accounts : X ₹ 1,60,000; Y ₹ 1,02,000 and Z ₹
1,31,000; Cash & Bank Balance ₹1,81,000; Z’s Current A/c (Dr.) ₹40,000; Balance Sheet Total
₹5,66,500; Sacrificing Ratio 4 : 1; New Ratio 6 : 4 : 5.]
Hints : (1) Workmen Compensation Reserve is appearing at ₹40,000, whereas, the actual
liability is ₹ 16,000. Hence, ₹ 16,000 will be shown in liabilities and ₹24,000 will be transferred
to the credit side of Capital Accounts of old partners in their old ratio.
(2) Since Z is unable to bring in his share of goodwill in cash, his Current A/c will be debited
instead of his Capital A/c from his share of goodwill.

Q. 106. Leena and Rohit are partners in a firm sharing profits in the ratio of 3 : 2. On 31st
March, 2018, their Balance Sheet was as follows :
 BALANCE SHEET OF LEENA AND ROHIT
as at 31-3-2018

Liabilities ₹ Assets ₹

Sundry Creditors 80,000 Cash 42,000

Bills Payable 38,000 Debtors 1,32,000

General Reserve 50,000 Less : Provision for

Capital : Doubtful debts 2,000 1,30,000

Leena 1,60,000 Stock 1,46,000

Rohit 1,40,000 3,00,000 Plant and Machinery 1,50,000

4,68,000 4,68,000

On the above date Manoj was admitted as a new partner for 1/5th share in the profits of the
firm on the following terms :
(i) Manoj brought proportionate capital. He also brought his share of goodwill premium of
₹80,000 in cash.
(ii) 10% of the general reserve was to be transferred to provision for doubtful debts.
(iii) Claim on account of workmen’s compensation amounted to ₹40,000.
(iv) Stock was overvalued by ₹ 16,000.
(v) Leena, Rohit and Manoj will share future profits in the ratio of 5 : 3 : 2.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the
reconstituted firm. (C.B.S.E. 2019)
[Ans. Loss on Revaluation ₹56,000; Capital Accounts : Leena ₹ 1,93,400; Rohit ₹1,75,600
and Manoj ₹92,250; B/S Total ₹6,19,250; Sacrificing Ratio 1 : 1.]
Q. 107. On 31st March, 2019 the Balance Sheet of Madan and Mohan who share profits and
losses in the ratio of 3 : 2 was as follows:
Balance Sheet of Madan and Mohan
as at 31st March, 2019

Liabilities ₹ Assets ₹

Creditors 28,000 Cash at Bank 10,000

General Reserve 10,000 Debtors 65,000

Employees Provident Fund 22,000 Less : Provision for

Capitals : Doubtful debts 5,000 60,000

Madan 60,000 Stock 33,000

Mohan 40,000 1,00,000 Patents 57,000

 1,60,000 1,60,000

They decided to admit Gopal on 1st April, 2019 for 1/5th share which Gopal acquired wholly
from Mohan on the following terms :
(i) Gopal shall bring ₹ 10,000 as his share of premium for Goodwill.
(ii) A debtor whose dues of ₹3,000 were written off as bad debt paid ₹2,000 in full settlement.
(iii) A claim of ₹5,000 on account of workmen’s compensation was to be provided for.
(iv) Patents were undervalued by ₹2,000. Stock in the books was valued 10% more than its
market value.
(v) Gopal was to bring in capital equal to 20% of the combined capitals of Madan and Mohan
after all adjustments.
Prepare Revaluation Account, Capital Accounts of the Partners and the Balance Sheet of the
new firm. (C.B.S.E. 2019, C)
[Ans. Loss on Revaluation ₹4,000; Capitals : Madan ₹63,600; Mohan ₹52,400 and Gopal
₹23,200; Bank Balance ₹45,200; Balance Sheet Total ₹ 1,94,200.]
Q. 108. Pappu and Dhanraj were partners in a firm sharing profits in the ratio of 3:1. Their
Balance Sheet as at 31-3-2023 was as follows :

Liabilities Amount Assets Amount

₹ ₹

Creditors 30,000 Debtors 50,000

Bills Payable 1,000 Less : Provision 5,000 45,000

Reserve Fund 16,000 Stock 30,000

Outstanding Salary 3,000 Bills Receivable 10,000

Capitals : Patents 1,000

Pappu 60,000 Machinery 40,000

Dhanraj 20,000 80,000 Cash 4,000

1,30,000 1,30,000

They admitted Leander as a new partner on 1st April, 2020. New profit sharing ratio is agreed
as 3 : 2 : 3. Leander brings in proportionate capital after the following adjustments :
(i) Leander brings ₹ 16,000 as his share of goodwill.
(ii) Provision for doubtful debts is to be reduced by ₹2,000.
(iii) There is an old typewriter valued at ₹2,400. It does not appear in the books of the firm. It
is now' to be recorded.
(iv) Patents are valueless.
Prepare Revaluation Account, Capital Accounts and the Opening Balance Sheet of Pappu,
Dhanraj and Leander.
[Ans. Profit on Revaluation ₹ 3,400; Balances of Capital Accounts, Pappu ₹90,550; Dhanraj
₹24,850 and Leander ₹69,240. Total of B/S ₹2,18,640.]
Hint : Pappu will be entitled to the full amount of goodwill brought in by Leander because only
he sacrifices his profit share.
Q. 109. A and B are partners in a firm. They share profits and losses as 4/5th and l/5th
respectively. Below is given the Balance Sheet of the firm as at 31st March, 2022 :

Liabilities ₹ Assets ₹

Capital Accounts : Plant 75,000

A 1,15,000 Stock 80,000

B 35,000 1,50,000 Debtors 60,000

Sundry Creditors 65,000 Cash 25,000

Bills Payable 15,000 Goodwill 20,000

Reserve 30,000

2,60,000 2,60,000

C wants to join the firm from 1st April, 2022. He is willing to pay goodwill premium to partners
amounting to ₹20,000. In return he will be allowed to share 1 /5th of the future profits of the
firm which he acquires equally from A and B. The following revaluation of the assets is agreed
upon : Plant to be reduced to ₹60,000, stock to ₹65,000 and debtors to ₹50,000 (₹ 10,000
proved bad debts). The new partner is to introduce 50% of the adjusted capitals of the existing
partners. You are required to give journal entries recording the above transactions. Give also
the opening balance sheet of the new firm and new profit-sharing ratio.
[Ans. Loss on revaluation ₹40,000; Capital : A ₹ 1,01,000; B ₹39,000; and C ₹70,000; Balance
Sheet total ₹2,90,000; New profit sharing ratio 7:1:2.]
Hint : Goodwill appearing in the balance sheet will be written off by the old partners in their
old ratio.
Q. 110. A and B are partners in a firm sharing profit and losses in the ratio of 3 : 1. On 1 st
April, 2022 their position was as given below :

Liabilities ₹ Assets ₹

Capital Accounts: Goodwill 20,000

A 2,00,000 Plant 1,00,000

B 80,000 2,80,000 Patents 10,000

Sundry Creditors 70,000 Stock 1,42,000

Workmen Compensation Reserve 10,000 Sundry Debtors 50,000

Cash 18,000

Profit & Loss Account 20,000

 3,60,000 3,60,000

They admit C into partnership with l/6th share in profits upon the following terms:
(I) Goodwill is to be valued at one year’s purchase of the five year’s average profits which
were ₹20,000; ₹30,000; ₹30,000; ₹40,000 and ₹60,000 respectively.
(II) C agrees to contribute 1/4 of the combined capital of A and B in the new firm.
(III) Plant is to be written down to ₹ 80,000 and Patents written up to ₹ 12,000. A provision of
2% on debtors is required. A liability of ₹5,000 included in Sundry Creditors is not likely to
arise.
Give the Journal entries and Balance Sheet after the admission of C.
[Ans. Loss on Revaluation 114,000; Capital Accounts A ₹ 1,71,500; B ₹ 70,500 and C ₹60,500;
C’s Current A/c (Dr.) ₹6,000; Cash Balance ₹78,500; B/S Total ₹3,67,500.]
Hints : C’s share of goodwill has been debited to his Current A/c instead of his Capital A/c.
Q. 111. Dhruv and Ansh are partners in a firm sharing profits and losses : Dhruv 75% and
Ansh 25% respectively.
Their Balance Sheet as at 31st March, 2016 is given below :

Liabilities Amount Assets Amount

₹ ₹

Sundry Creditors 39,000 Cash 10,000

Workmen Compensation Reserve 5,000 Sundry Debtors 18,500

Profit & Loss Account 10,000 Less : Provision for

Capital Accounts: Doubtful

Dhruv 30,000 Debts (1,500) 17,000

Ansh 20,000 50,000 Stock 37,000

Furniture 5,000

Land & Buildings 25,000

Goodwill 10,000

1,04,000 1,04,000

On 1st April, 2016, Kavi is admitted as a new partner on the following terms :
(i) The value of stock is to be increased to ₹42,000.
(ii) Land and Building is to be reduced by 20%.
(iii) Bad Debts amounting to ₹ 1,800 are to be written off.
(iv) Creditors include an amount of ₹5,000 received as commission from Amar. The necessary
adjustment is required to be made.
(v) The liability of Workmen Compensation Reserve is determined at ₹3,000.
(vi) Kavi is to pay ₹ 15,000 to tine existing partners as premium for Goodwill for 20% of the
1
future profits of the firm. He is also to bring in capital equal to 4th of the combined capitals of
Dhruv and Ansh.
You are required to :
(i) Pass journal entries on the date of Kavi’s admission.
(ii) Prepare the opening Balance Sheet of the new firm on the completion of the transactions.
(I.S.C. Specimen Question Paper, 2017)
[Ans. Profit on Revaluation ₹4,700; Capital A/cs : Dhruv ₹46,275; Ansh ₹25,425 and Kavi ₹
17,925; B/S Total ₹ 1,26,625.]
112. Raman and Rohit were partners in a firm sharing profits and losses in the ratio of 2 : 1.
On 31st March, 2018, their Balance Sheet was as follows:
BALANCE SHEET OF RAMAN AND ROHIT as at 31st March, 2018

Liabilities ₹ Assets ₹

Capitals: Plant and Machinery 1,75,000

Raman 1,40,000 Furniture and Fixtures 65,000

Rohit 1,00,000 2,40,000 Stock 47,000

Workmen Compensation
Fund 40,000 Debtors 1,10,000

Less: Provision for Doubtful

Creditors 1,60,000 Debts 7,000 1,03,000

Bank Balance 50,000

4,40,000 4,40,000

On the above date, Saloni was admitted in the partnership firm. Raman surrendered 2/5th of
his share and Rohit surrendered 1 /5th of his share in favour of Saloni. It was agreed that:
(i) Plant and machinery will be reduced by ₹ 35,000 and furniture and fixtures will be reduced
to ₹ 58,500.
(ii) Provision for bad and doubtful debts will be increased by ₹ 3,000.
(iii) A claim for ₹ 16,000 for workmen's compensation was admitted.
(iv) A liability of ₹ 2,500 included in creditors is not likely to arise.
(v) Saloni will bring ₹ 42,000 as her share of goodwill premium and proportionate capital.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the
reconstituted firm. (CBSE 2019)
[Ans.: Loss on Revaluation = ₹ 42,000; Partners' Capital Accounts: Raman—₹ 1,61,600;
Rohit—₹ 1,02,400; Saloni—₹ 1,32,000; Balance Sheet Total—₹ 5,69,500.]
113. L, M and N were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance
Sheet on 31st March, 2015 was as follows:
Liabilities ₹ Assets ₹

Creditors 1,68,000 Bank 34,000

General Reserve 42,000 Debtors 46,000

Capital A/cs: Stock 2,20,000

L 1,20,000 Investments 60,000

M 80,000 Furniture 20,000

N 40,000 2,40,000 Machinery 70,000

4,50,000 4,50,000

On the above date, O was admitted as a new partner and it was decided that:
(i) The new profit-sharing ratio between L, M, N and O will be 2 : 2 : 1 : 1.
(ii) Goodwill of the firm was valued at ₹ 1,80,000 and O brought his share of goodwill premium
in cash.
(iii) The market value of investments was ₹ 36,000.
(iv) Machinery will be reduced to ₹ 58,000.
(v) A creditor of ₹ 6,000 was not likely to claim the amount and hence was to be written off.
(vi) O will bring proportionate capital so as to give him 1 /6th share in the profits of the firm.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the new
firm. (A/ 2016)
(Ans.: Loss on Revaluation—₹ 30,000; Capital A/cs: L—₹ 1,56,000; M—₹ 84,000;
N—₹ 42,000 and O—₹ 56,400; Balance Sheet Total—₹ 5,00,400.]
114. Leena and Rohit are partners in a firm sharing profits in the ratio of 3 : 2. On 31st March,
2018, their Balance Sheet was as follows:
BALANCE SHEET OF LEENA AND ROHIT as at 31st March, 2018

Liabilities ₹ Assets ₹

Sundry Creditors 80,000 Cash 42,000

Bills Payable 38,000 Debtors 1,32,000

General Reserve 50,000 Less: Provision for Doubtful 1,30,000

Debts 2,000

Capitals: Stock 1,46,000

Leena 1,60,000 Plant and Machinery 1,50,000

Rohit 1,40,000 3,00,000

4,68,000 4,68,000
On the above date Manoj was admitted as a new partner for 1 /5th share in the profits of the
firm on the following terms:
(i) Manoj brought proportionate capital. He also brought his share of goodwill premium of ₹
80,000 in cash.
(ii) 10% of the general reserve was to be transferred to provision for doubtful debts.
(iii) Claim on account of workmen's compensation amounted to ₹ 40,000.
(iv) Stock was overvalued by ₹ 16,000.
(v) Leena, Rohit and Manoj will share future profits in the ratio of 5 : 3 : 2.
(CBSE 2019)
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the
reconstituted firm.[Ans.: Loss on Revaluation—₹ 56,000; Partners' Capital Accounts:
Leena—₹ 1,93,400;
Rohit—₹ 1,75,600; Manoj—₹ 92,250; Balance Sheet Total—₹ 6,19,250.]
115. On 31st March, 2023 the Balance Sheet of Ram and Shyam who share profits and losses
in the ratio of 3 : 2 was as follows:
BALANCE SHEET OF RAM AND SHYAM as at 31st March, 2023

Liabilities ₹ Assets ₹

Creditors 70,000 Cash at Bank 25,000

General Reserve 25,000 Debtors 1,62,500

Employees' Provident Less: Provision for Doubtful

Fund 55,000 debts 12,500 1,50,000

Capitals: Stock 82,500

Ram 1,50,000 Machinery 1,42,500

Shyam 1,00,000 2,50,000

4,00,000 4,00,000

They decided to admit Mahesh on 1st April, 2023 for 1 /5th share which Mahesh acquired
wholly from Shyam on the following terms:
(i) Mahesh shall bring ₹ 25,000 as his share of premium for Goodwill.
(ii) A debtor whose dues of ₹ 7,500 were written off as bad debt paid ₹ 5,000 in settlement.
(iii) A claim of ₹ 12,500 on account of workmen's compensation was to be provided for.
(iv) Machinery was undervalued by ₹ 5,000. Stock was valued 10% more than its market value.
(v) 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.
[Ans.: Loss on Revaluation—₹ 10,000; Partners' Capital Accounts: Ram—₹ 1,59,000;
Shyam—₹ 1,31,000; Mahesh—₹ 58,000; Balance Sheet Total—₹ 4,85,500.]
116. Aan and Shaan were partners sharing profits in the ratio of 3 : 2. Their Balance Sheet as
at 31st March, 2023 was as under:

Liabilities ₹ Assets ₹

Creditors 2,00,000 Cash 1,48,000

Employees' Provident Fund 30,000 Debtors 2,05,000

Less: Provision for Doubtful

Bank Overdraft 1,70,000 Debts 3,000 2,02,000

Reserve 1,50,000 Stock 2,00,000

Capital A/cs: Plant and Machinery 6,00,000

Aan's 7,00,000 Building 7,00,000

Shaan's 6,00,000 13,00,000

18,50,000 18,50,000

They agreed to admit Mohan for 1/4th share on the above date subject to the following terms:
(i) Mohan to bring in capital equal to 1/4th of the total capital of Aan and Shaan after all
adjustments including premium for goodwill.
(ii) Building to be appreciated by 20% and stock to be depreciated to 70%.
(iii) Provision for Doubtful Debts on Debtors to be raised to ₹ 10,000.
(iv) A provision be made for ₹ 18,000 for outstanding legal charges.
(v) Mohan's share of goodwill premium was calculated as ₹ 1,00,000.
Prepare the Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the
new firm.
[Ans.: Gain on Revaluation—₹ 55,000; Capital Accounts: Aan—₹ 8,83,000;
Shaan—₹ 7,22,000; Mohan—₹ 4,01,250; Total of Balance Sheet—₹ 24,24,250.]
[Hints: 1. It is assumed that Mohan brings his share of goodwill in cash.
2. Mohan's Capital = 1/4th of Adjusted capital of Aan and Shaan = 1/4 × ₹ (8,83,000 +
7,22,000) = ₹ 4,01,250.)

. 117. Following is the Balance Sheet of Amit and Vidya as at 31st March, 2021:

Liabilities Amount Assets Amount

₹ ₹

Creditors 26,000 Bank 20,000

Employees Provident Fund 16,000 Stock 30,000

Workmen’s Compensation Debtors 44,000

Reserve 30,000 Less : Provision for

Capital A/cs : Amit 1,10,000 Bad Debts 2,000 42,000

Vidya 60,000 1,70,000 Plant and Machinery 1,20,000

Goodwill 20,000

Profit and Loss Account 10,000

2,42,000 2,42,000

On the above date, Chintan was admitted as a partner for 1/4th share in the profits of the firm
with the following terms :
(a) ₹2,900 will be written off as Bad Debts.
(b) Stock was taken over by Vidya at ₹35,000.
(c) Goodwill of the firm was valued at ₹40,000. Chintan brought his share of goodwill premium
in cash.
(d) Chintan brought proportionate capital and the capitals of the other partners were adjusted
on the basis of Chintan’s Capital. For this necessary cash was to be brought in or paid off to
the partners as the case may be.
Prepare Revaluation Account and Partners’ Capital Accounts.
[Ans. Profit on Revaluation ₹4,100; Capital Accounts : Amit ₹74,550, Vidya ₹74,550 and
Chintan ₹49,700; Amit withdraws ₹42,500 and Vidya brings in ₹42,500.]
118.***** A, B and C are partners sharing profits and losses in the ratio of 3 : 2 : 1. Their
Balance Sheet as at 31st March, 2023 is as follows:

Liabilities ₹ Assets ₹

Capital A/cs: Land and Building 50,000

A 60,000 Plant and Machinery 40,000

B 60,000 Furniture 30,000

C 40,000 1,60,000 Stock 20,000

Creditors 30,000 Debtors 30,000

Bills Payable 10,000 Bills Receivable 20,000

Bank 10,000

2,00,000 2,00,000

D is admitted as a partner on 1st April, 2023. 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, 2023 but entry was not passed for dishonour.
(e) Provision for Doubtful Debts @ 5% is to be created against Debtors.
(f) Expenses on Revaluation of ₹ 2,100 is paid by A.
Prepare necessary Ledger Accounts and Balance Sheet after D's admission.
[Ans.: Loss on Revaluation—₹ 600; Partners' Capital A/cs: A—₹ 61,800; B—₹ 57,800;
C—₹ 39,900; D—₹ 50,000; Balance Sheet Total—₹ 2,39,500.]
[Hint: When a bill previously discounted, is dishonoured, Debtor's Account is debited and
Bank Account is credited, i.e., Debtor's balance is increased and Bank balance is decreased
 RETIREMENT OF A PARTNER
Q. 1 (A). A, B and C are partners sharing profits in the ratio of 6 : 5 : 4. Calculate new profit
sharing ratios if (i) A retires; (ii) B retires; (iii) C retires.
[Ans. (i) 5 : 4; (ii) 6 : 4; (iii) 6 : 5]
Q. 1 (B). A, B, C and D are partners sharing profits in the ratio of 5 : 3 : 1 : 2. Calculate the
new profit sharing ratio if B and C retire from the firm.
[Ans. 5 : 2]
Q. 2. X, Y and Z are partners sharing profits in the ratio of 2/3 : 1/4 : 1/12. Calculate the new
ratio if X retires.
[Ans. 3:1]
Q. 3. L, M and O were partners in a firm sharing profits in the ratio of 3 : 2 : 2. M retired and
his share was divided equally between L and O. Calculate the new profit sharing ratio of L and
O.
[Ans. 4:3]
Q. 4 .A, B and C are partners sharing profits in the ratio of 4 : 3 : 2. B retires and his share
was taken up by A and C in the ratio of 3 : 2. Find out the new ratio.
[Ans.29: 16]
Q. 5 (A) A, B and C are partners sharing profits in the ratio of 4 : 3 : 1. A retires and his share
is taken over by B and C equally. Calculate the new ratio.
[Ans. 5 : 3]
Q. 5 B and C are partners sharing profits in the ratio of 1/2 : 1/3 : 1/6. B retires and his share
is taken by A and C in the ratio of 5 : 3. Calculate the new ratio.
[Ans. 17 : 7]
Q. 6.X,Y and Z are partners sharing in the ratio of 2 : 2 : 1. Y retires and his share is entirely
taken by Z. Calculate the new ratio.
[Ans. 2 : 3]
Q. 7, Aman, Naman and Neel were partners in a firm sharing profits in the ratio of 1 : 2 : 1.
2
Neel retires and he surrenders — 3rd of his share in favour of Aman and the remaining share
in favour of Naman.
Calculate the new profit sharing ratio of Aman and Naman.
(C.B.S.E. 2022, Delhi)
[Ans. New Profit Sharing Ratio = 5:7.
Q. 8. P, Q, R and S were partners in a firm sharing profits and losses in the ratio of 4 : 3 : 2 :
1. On 31st March, 2022, P retired from the firm. P's share was taken over by Q, R and S in
the ratio of 1 : 2 : 3. Calculate the new profit sharing ratio of Q, R and S.
(C.B.S.E. 2022, C)
[Ans. New Profit Sharing Ratio 11:10:9.]
Q. 9. P, Q and R are in partnership sharing profits and losses as 1/2, 2/6 and 1/6 respectively.
R retires and his share is taken by P and Q in the ratio of 2 : 1. Immediately, S is admitted for
l/4th share of profit, 1/3rd of which was given by P and the remaining share was taken equally
from P and Q. Calculate new profit-sharing ratio after S's admission.
[Ans. New Profit Sharing Ratio of P, Q and 5 = 16: 11 : 9.]
Q. 10 (A). A, B and C were partners sharing profits in the ratio of 7 : 5 : 3. Find out the gaining
ratio and new ratios when (i) A retires, (ii) B retires or (iii) C retires.
[Ans. Gaining Ratios — (i) 5 : 3; (ii) 7 : 3; (iii) 1 : 5,
New Ratios — (i) 5 : 3; (ii) 1: 3; (iii) 1 : 5]
Q. 10 (B). Y and Z share profits in the ratio of 1/2, 3/10, 1/5. Calculate the gaining ratio and
new ratios when :
(i) X dies, (ii) Y dies or (iii) Z dies.
[Ans. Gaining Ratios — (i) 3 : 2; (ii) 5 : 2; (iii) 5 : 3.
New Ratios — (i) 3 : 2; (ii) 5 : 2; (iii) 5:3.]
Q. 10 (C). P, Q, P and S were partners sharing profits in the ratio of 5 : 4 : 3 : 1. P and S retire
from the firm. Calculate the gaining ratio and new profit sharing ratio of Q and R.
[Ans. Gaining Ratio — 4:3 and New Ratio — 4:3.]
Q. 11 (A) On 1st April, 2023 Ashish, Namish and Aman were partners sharing profits and
losses in the ratio of 2/5, 2/5 and 1/5 respectively. On this date Namish retires. The new profit
sharing ratio of Ashish and Aman will be 3/4 and 1/4 respectively. Calculate gaining ratio.
[Ans. 7:1.]
Q. 11 (B). On 1st April, 2023 A, B and C were partners sharing profits and losses in the ratio
of A 5/10, B 3/10 and C 2/10 respectively. On this date B retires. The new profit sharing ratio
of A and C will be A 3/5 and C 2/5. Calculate gaining ratio.
[Ans. 1 : 2]
Q. 12 (A). A, B and C are partners sharing profits in the ratio of 1/2 : 1/3 : 1/6. C retires and A
and B decide to share future profits equally. Calculate the gaining ratio.
[Ans. A gains nothing; B gains 1/6.]
Q. 12 (B). A, B, C and D are partners sharing profits in the ratio of 5:4:3: 2. A retires and B, C
and D decide to share the profits and losses equally in future. Calculate the gaining ratio.
[Ans. Gaining Ratio 2:5:8]
Q. 13. Rekha, Ruchi and Suruchi are partners. Ruchi retires. Calculate new ratio if continuing
partners acquired her share in the ratio of 2 : 3. Also mention the gaining ratio.
[Ans. New Ratio 7 : 8; Gaining Ratio 2 : 3.]
Q. 14. X, Y and Z are partners sharing profits in the ratio of 1/9: 1/3 and 5/9. Z retires and
surrenders 3/4th of this share in favour of X and remaining in favour of Y. Calculate new ratio
and gaining ratio.
[Ans. New Ratio 19 : 17; Gaining Ratio 3:1.]
Q. 15. P, Q, R and S were partners sharing profits in the ratio of 2 : 3 : 5 : 2. S retires and his
share is acquired by Q and R in the ratio of 3 : 2. Calculate new ratio and gaining ratio.
[Ans. New Ratio 10 : 21 : 29; Gaining Ratio between Q and R 3 : 2.]
Q. 16. X, Y and Z are partners sharing profits in the ratio of 5 : 4 : 3. X retires from the firm
and it is decided that new profit-sharing ratio between Y and Z will be same as existing
between X and Y. Calculate new ratio and gaining ratio.
[Ans. New Ratio 5 : 4; Gaining Ratio 8 : 7]
[Ans. New Ratio 5 : 4; Gaining Ratio 8 : 7]
17. Sunil, Shahid and David are partners sharing profits and losses in the ratio of 4:3:2. Shahid
retires and the goodwill is valued at ₹ 72,000. Calculate Shahid's share of goodwill and pass
the Journal entry for Goodwill. Sunil and David decided to share future profits and losses in
the ratio of 5 :3.
[Ans.: Shahid's share of Goodwill = ₹ 72,000 × 3/9 = ₹ 24,000; Dr. Sunil's Capital A/c by ₹
13,000 and
David's Capital A/c by ₹ 11,000; Cr. Shahid's Capital A/c by ₹ 24,000.]
[Hint: Sunil gains = 5/8 - 4/9 = 13/72; David gains = 3/8 - 2/9 = 11/72. Hence, Gaining Ratio
= 13:11.]
18.. P, Q, Band 5 were partners in a firm sharing profits in the ratio of 5 : 3 :1 :1. On 1st
January, 2023, S retired from the firm. On S's retirement, goodwill of the firm was valued at ₹
4,20,000. New profit-sharing ratio among P, 0 and B will be 4: 3 : 3.
Showing your working notes clearly, pass necessary Journal entry for the treatment of goodwill
in the books of the firm on S's retirement. {Foreign 2017, Modified)
[Ans.: Dr. R's Capital A/c by ₹ 84,000; Cr. P's Capital A/c and S's Capital A/c by ₹ 42,000
each.]
19. Aparna, Manisha and Sonia are partners sharing profits in the ratio of 3:2:1. Manisha
retired and goodwill of the firm is valued at₹ 1,80,000. Aparna and Sonia decided to share
future profits in the ratio of 3:2. Pass necessary Journal entries. (NCERT)
[Ans.: Gaining Ratio = 3:7; Dr. Aparna's Capital A/c by 118,000 and Sonia's Capital A/c by ₹
42,000;
Cr. Manisha’s Capital A/c by ₹ 60,000.]
20. A, B and C are partners sharing profits in the ratio of 3 : 2 : 1. B retired and the new profit-
sharing ratio between A and Cwas2:1.On S's retirement, the goodwill of the firm was valued
at₹ 90,000. Pass necessary Journal entry for the treatment of goodwill on B's retirement.
[Ans.: Dr. A’s Capital A/c and C's Capital A/c by ₹ 15,000 each;
Cr. B's Capital A/c by ₹ 30,000; Gaining Ratio— 1:1.]
21. Aman, Bimal and Deepak are partners sharing profits in the ratio of 2 : 3 : 5. The goodwill
of the firm has been valued at ₹ 37,500. Aman retired. Bimal and Deepak decided to share
profits equally in future. Calculate gain/sacrifice of Bimal and Deepak on Aman's retirement
and also pass necessary Journal entry for the treatment of goodwill. (CBSE2019)
[Ans.: Bimal alone gains. Dr. Bimal's Capital A/c and Cr. Aman's Capital A/c by ₹ 7,500.]

Hidden Goodwill
22. A, B and C are partners sharing profits in the ratio of 4/9 : 3/9 : 2/9. B retires and his capital
after making adjustments for reserves and gain (profit) on revaluation stands at ₹ 1,39,200. A
and C agreed to pay him ₹ 1,50,000 in full settlement of his claim. Record necessary Journal
entry for adjustment of goodwill if the new profit-sharing ratio is decided at 5 :3.
[Ans.: Hidden Goodwill (B's Share):₹ 10,800: Gaining Ratio—13: 11; Dr. A’s Capital A/c by ₹
5,850 and
C's Capital A/c by ₹ 4,950; Cr. B’s Capital A/c by ₹ 10,800.]
23. 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.
[Ans.: Share in Hidden Goodwill = ₹ 70,000.]

24. L, M and N are three partners sharing profits in the ratio of 4 : 3 : 2 respectively. M retires
and the goodwill is valued at ₹ 1,08,000. No goodwill account appears as yet in the books of
the firm. L and N will share profits in future in the ratio of 5 : 3 respectively. Pass Journal Entry
for goodwill. (NCERT)
[Ans. M’s share of goodwill will be adjusted to the Capital A/cs of L and N in their Gaining Ratio
13 : 11.]
Q. 25. Ashok, Rakesh and Mukesh were partners sharing profits and losses in the ratio of 2 :
2 : 1. On 1st April, 2023, their goodwill was valued at ₹3,00,000: there being no account for it
in the books. On this date Rakesh retired. Pass the Journal Entry to record goodwill.
[Ans. Rakesh’s share of goodwill will be adjusted to the Capital A/cs of Ashok and Mukesh in
their Gaining Ratio 2:1.]
Q. 26. A, B and C are sharing profits in the ratio of 4 : 3 : 2. Goodwill is appearing in the books
at a value of ₹42,000. C retires and on the day of C’s retirement Goodwill is valued at ₹63,000.
Pass the necessary journal entries.
[Ans. (i) Goodwill of ₹42,000 will be written off in 4 : 3 : 2; (ii) C’s share of Goodwill of ₹63,000
i.e., ₹ 14,000 will be adjusted into the Capital A/cs of A and B in gaining ratio of 4 : 3.]
Q. 27. P. Q and R are equal partners. Goodwill is appearing in their books at ₹4,00,000. R
retires and on the day of R's retirement Goodwill is valued at ₹2,50,000. Pass the necessary
journal entries.
Q. 28. A, B and C are partners sharing profits and losses in the ratio of 2:2:1. C decided to
retire and on this date goodwill of the firm is valued at ₹2,00,000. Pass entries when goodwill
account is already appearing in the books at ₹ 1,50,000.
Q. 29 P, R and S are in partnership sharing profits 4/8, 3/8 and 1/8 respectively. It is provided
under the partnership deed that on the death of any partner his share of goodwill is to be
valued at one-half of the net profits credited to his account during the last 4 completed years
(books of accounts are closed on 31 st March).
R died on 1st April, 2022. The firm’s profits for the last 4 years were as follows: 2019 (Profits
₹ 1,20,000); 2020 (Profits ₹ 60,000); 2021 (Losses ₹20,000) and 2022 (Profits ₹ 80,000).
1. Determine the amount that should be credited to R in respect of his share of goodwill.
2. Pass journal entry for the adjustment of goodwill, assuming that profit sharing ratio between
P and S in future will be 3 : 2. Show your working clearly.
[Ans. R’s share of goodwill ₹45,000; to be debited to P and S in the ratio of 4 : 11.]
Q. 30. A, B, C and D are partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1 :
1.A and C decided to retire from the firm. The goodwill of the firm was valued at ₹90,000. B
and D decided to share future profits in the ratio of 5 : 3.
Pass necessary journal entry for the treatment of goodwill.
[Ans. Debit B by ₹26,250 and D by ₹ 18,750; and Credit A by ₹30,000 and C by ₹ 15,000.]
Q. 31. Surender, Ramesh, Naresh and Mohan are partners in a firm sharing profits in 2 : 1 : 2
: 1 ratio. On the retirement of Naresh, the Goodwill was valued at ₹72,000. Surender, Ramesh
and Mohan decided to share future profits equally. Pass the necessary journal entry for the
treatment of goodwill.
[Ans. Ramesh’s Capital A/c Dr. 12,000
Mohan’s Capital A/c Dr. 12,000
To Naresh’s Capital A/c 24,000
(Naresh share of goodwill adjusted to the accounts
of continuing partners in their gaining ratio 0:1:1) ]
Q. 32. Arjun, Bhim and Nakul are partners sharing profits and losses in the ratio of 14 : 5 : 6
respectively. Bhim retires and surrenders his 5/25th share in favour of Arjun. The goodwill of
the firm is valued at 2 years purchase of super profits based on average profits of last 3 years.
The profits for the last 3 years are ₹ 50,000, ₹ 60,000 and ₹55,000 respectively. The normal
profits for the similar firm are ₹30,000. Goodwill already appears in the books of the firm at
₹75,000. The profit for the first year after Bhim’s retirement was ₹ 1,00,000. Give the
necessary journal entries to adjust Goodwill and to distribute profits showing your workings
clearly.
[Ans. (i) Entry for Adjustment of Goodwill :
Arjun’s Capital A/c Dr. 10,000
To Bhim’s Capital A/c 10,000
(ii) New Ratio 19:6.]
Q. 33 (A). On 31st March, 2022 the Balance Sheet of M/s A, B and C sharing profits and
losses in proportion to their fixed capitals stood as follows :

Liabilities ₹ Assets ₹

Creditors 1,08,000 Cash at Bank 80,000

General Reserv e 1,80,000 Debtors 1,00,000

Capital Acs : Less: Provision 2,000 98,000

A 3,60,000 Stock 90,000

B 2,40,000 Machinery 2,40,000

C 1,20,000 7,20,000 Land and Buildings 5,00,000

10,08,000 10,08,000

On 1st April, 2022, B wants to retire from the firm and the remaining partners decide to carry
on. The following re-adjustments of assets and liabilities have been agreed upon before the
ascertainment of the amount payable to B :
(i) that, out of the Fire Insurance Premium paid during 2021-22, ₹ 10,000 be carried forward
as unexpired.
(ii) that the land and buildings be appreciated by 10%.
(iii) that provision for doubtful debts be brought upto 5% on debtors.
(iv) that the machinery be depreciated by 5%.
(v) that a provision for ₹ 15,000 be made in respect of an outstanding bill for repairs.
(vi) that the goodwill of the entire firm be at ₹ 1,80,000 and B's share of the same adjusted in
the A/cs of A and C who share future profits in the proportion of 3/4th and l/4th respectively;
and
(vii) that B be paid ₹50,000 in cash and the balance be transferred to his Loan A/c.
Prepare Revaluation A/c, Partner’s Current Accounts, Capital Accounts and the Balance
Sheet of the firm of A and C.
[Ans. Profit on Revaluation ₹30,000; B's Loan A/c ₹3,20,000; Current Accounts: A ₹60,000
(Cr.) and C ₹20,000 (Cr.); Capitals : A ₹3,60,000; C ₹ 1,20,000; B/S Total ₹ 10,03,000]
[Ans.: Amount due to C—₹ 7,700.]
33.(B) Alfa, Beta and Gama are in partnership sharing profits in the ratio of 5 :3 : 2. Their
Balance Sheet on 1st April, 2022, the day Beta decided to retire from firm, was as follows:

Liabilities ₹ Assets ₹

Alfa's Capital 3,00,000 Building 2,50,000

Beta's Capital 2,00,000 Machinery 1,50,000

Gama's Capital 2,00,000 Investments 2,50,000

General Reserve 1,00,000 Debtors 1,00,000

Sundry Creditors 1,00,000 Stock 50,000

Cash at Bank 1,00,000

9,00,000 9,00,000

The terms of retirement were:

(i) Beta takes goodwill from Alfa for ₹ 30,000 and from Gama for ₹ 40,000 for foregoing his
share of profits.
(ii) Stock to be appreciated by 20% and building by ₹ 50,000.
(iii) Investments were sold for ₹ 2,70,000.
(iv) Beta is paid by bank draft.
Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of the new firm.
[Ans.: Gain (Profit) on Revaluation—₹ 80,000; Amount paid to Beta—₹ 3,24,000;
Partners' Capital Accounts: Alfa—₹ 3,60,000; Gama—₹ 1,96,000
Balance Sheet Total—₹ 6,56,000.]
34. Kanika, Disha and Kabir were partners sharing profits in the ratio of 2 : 1 : 1. On 31st
March, 2016, their Balance Sheet was as under:

Liabilities ₹ Assets ₹

Trade creditors 53,000 Bank 60,000

Employees' Provident Fund 47,000 Debtors 60,000

Kanika's Capital 2,00,000 Stock 1,00,000

Disha's Capital 1,00,000 Fixed Assets 2,40,000

Kabir's Capital 80,000 Profit & Loss A/c 20,000

4,80,000 4,80,000

Kanika retired on 1st April, 2016. For this purpose, the following adjustments were agreed
upon:
(a) Goodwill of the firm was valued at 2 years' purchase of average profits of three completed
years preceding the date of retirement. The profits for the year:
2013-14 were ₹ 1,00,000 and for 2014-15 were ₹ 1,30,000.
(b) Fixed Assets were to be increased to ₹ 3,00,000.
(c) Stock was to be valued at 120%.
(d) The amount payable to Kanika was transferred to her Loan Account.
Prepare Revaluation Account, Capital Accounts of the partners and the Balance Sheet of the
reconstituted firm. (AI 2017 C)
[Ans.: Gain (Profit) on Revaluation—₹ 80,000; Capital A/cs: Disha—₹ 80,000; Kabir—₹
60,000;
Kanika's Loan—₹ 3,00,000; Balance Sheet Total—₹ 5,40,000.)
35. N, S and G were partners in a firm sharing profits and losses in the ratio of 2 : 3 : 5. On 31
st March, 2016 their Balance Sheet was as under:

Liabilities ₹ Assets ₹

Creditors 1,65,000 Cash 1,20,000

General Reserve 90,000 Debtors 1,35,000

Capitals: Less: Provision 15,000 1,20,000

N 2,25,000 Stock 1,50,000

S 3,75,000 Machinery 4,50,000

G 4,50,000 10,50,000 Patents 90,000

Building 3,00,000

Profit & Loss Account 75,000

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) Patents will be completely written off and stock, machinery and building will be depreciated
by 5%.
(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. (Foreign 2017)
[Ans.: Loss on Revaluation—₹ 1,62,450; G's Loan—₹ 4,21,275.]
[Hints: 1. For Bad Debts written off: Dr. Bad Debts A/c and Cr. Debtors A/c by ^ 6,000.]
2. Dr. PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT Cr.

Particulars ₹ Particulars ₹

To Bad Debts A/c 6,000 By Balance b/d 15,000

To Revaluation A/c* (Balancing

Figure) 2,550

To Balance c/d [5% of (₹ 1,35,000 -

₹ 6,000)] 6,450

15,000 15,000

"Excess provision for bad and doubtful debts is credited to 'Revaluation Account'.]
36. Ashok, Bhaskar and Chaman are partners in a firm, sharing profits and losses as Ashok
1/3, Bhaskar 1/2, and Chaman 1/6 respectively. The Balance Sheet of the firm as at 31st
March, 2023 was:

Liabilities ₹ Assets ₹

Capital A/cs: Building 5,00,000

Ashok 3,00,000 Plant and Machinery 4,00,000

Bhaskar 4,00,000 Furniture 1,00,000

Chaman 2,50,000 9,50,000 Stock 2,50,000

General Reserve 2,20,000 Debtors 1,80,000

Less: Provision for

Sundry Creditors 2,50,000 Doubtful Debts 5,000 1,75,000

Loan Payable 1,50,000 Cash in Eland 85,000

Advertisement Suspense
Account 60,000

15,70,000 15,70,000
Chaman retired on 1 st April, 2023 subject to the following adjustments:
(a) Goodwill of the firm be valued at ₹ 2,40,000. Chaman's share of goodwill be adjusted into
the Capital Accounts of Ashok and Bhaskar who will share future profits in the ratio of 3 : 2.
(b) Plant and Machinery to be reduced by 10% and Furniture by 5%.
(c) Stock to be increased by 15% and Building by 10%.
(d) Provision for Doubtful Debts to be raised to ₹ 20,000.
Prepare Revaluation Account, Capital Account of Chaman and the Balance Sheet of the firm
after Chaman's retirement.
[Ans.: Gain (Profit) on Revaluation—₹ 27,500; Chaman's Loan—₹ 3,21,250; Partners'
Capital Accounts:
Ashok—₹ 2,98,500; Bhaskar—₹ 5,17,750; Balance Sheet Total—₹ 15,37,500.]
37. 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:
BALANCE SHEET OF CHINTAN, AYUSH AND SUDHA as at 31st March, 2019

Liabilities ₹ Assets ₹

Capitals: Plant and Machinery 90,000

Chintan 90,000 Furniture 60,000

Ayush 60,000 Stock 30,000

Sudha 40,000 1,90,000 Debtors 60,000

Less: Provision for Doubtful

Provident Fund 30,000 Debts 5,000 55,000

General Reserve 20,000 Cash at Bank 15,000

Creditors 10,000

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. (CBSE
2020 C)
 [Ans.: Gain (Profit) on Revaluation—₹ 10,250; Chintan's Loan—₹ 1,35,125.]
38. A, B and C are partners sharing profits and losses in the ratio of 4 : 3 : 3. Their Balance
Sheet as at 31st March, 2023 is:

Liabilities ₹ Assets ₹

Creditors 7,000 Land and Building 36,000

Bills Payable 3,000 Plant and Machinery 28,000

General Reserve 20,000 Computer Printer 8,000

Capital A/cs: Stock 20,000

A 32,000 Sundry Debtors 14,000

Less: Provision for Doubtful

24,000
8 Debts 2,000 12,000

C 20,000 76,000 Bank 2,000

1,06,000 1,06,000

On 1 st April, 2023, B retired from the firm on the following terms:

(a) Goodwill of the firm is to be valued at ₹ 14,000.
(b) Stock, Land and Building are to be appreciated by 10%.
(c) Plant and Machinery and Computer Printer are to be reduced by 10%.
(d) Sundry Debtors are considered to be good.
(e) Provision for legal charges to be made at ₹ 2,000.
(f) 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.
[Ans.: Gain (Profit) on Revaluation—₹ 2,000; B's Loan—₹ 34,800; Partners' Capital A/cs:
A—₹ 38,400; C—₹ 24,800; Balance Sheet Total—₹ 1,10,000.]
39. X, Y and Z are partners sharing profits and losses in the ratio of 3 : 2 : 1. Balance Sheet
of the firm as at 31st March, 2022 was as follows:

Liabilities ₹ Assets ₹

Creditors 21,000 Cash at Bank 5,750

Workmen Compensation
Reserve 12,000 Debtors 40,000

Investments Fluctuation Less: Provision for Doubtful

Reserve 6,000 Debts 2,000 38,000
Capital A/cs: Stock 30,000

X Investment (Market Value ₹ 15,000

68,000 17,600)

Y 32,000 Patents 10,000

Z 21,000 1,21,000 Machinery 50,000

Goodwill 6,000

Advertisement Suspense 5,250

1,60,000 1,60,000

Z retired on 1st April, 2022 on the following terms:

(a) Goodwill of the firm is to be valued at ₹ 34,800.
(b) Value of Patents is to be reduced by 20% and that of machinery to 90%.
(c) Provision for Doubtful Debts is to be @ 6% on debtors.
(d) Z took the investment at market value.
(e) Liability for Workmen Compensation to the extent of ₹ 750 is to be created.
(f) A liability of ₹ 4,000 included in creditors is not to be paid.
(g) Amount due to Z to be paid as follows:
₹ 5,067 immediately, 50% of the balance within one year and the balance by a draft for 3
Months.
Give necessary Journal entries for the treatment of goodwill, prepare Revaluation Account,
Capital Accounts and the Balance Sheet of the new firm.
[Ans.: Loss on Revaluation—₹ 800; Partners’ Capital Accounts: X—₹ 67,120; and
Y—₹ 31,413; Z’s Loan—₹ 2,500; Balance Sheet Total—₹ 1,21,283.]
[Hint: Journal Entries for Goodwill: (i) Dr. Xs Capital A/c—₹ 3,000; Y’s Capital A/c—₹ 2,000
and Zs Capital A/c—₹ 1,000; Cr. Goodwill A/c—₹ 6,000.
(ii) Dr. Zs Capital A/c—₹ 3,480 and Ys Capital A/c—₹ 2,320;
Cr. Zs Capital A/c—₹ 5,800.]
Q.40. X. Y and Z are partners in a firm sharing profits and losses equally. The balance sheet
of the firm as at 31st March, 2023 stood as follows :

Liabilities ₹ Assets ₹

Creditors 1,09,000 Cash in Hand and Cash at Bank 86,000

General Reserve 60,000 Debtors 2,00,000

Provident Fund 20,000 Stock 1,00,000

Capitals : Investments (at cost) 50,000

X 3,00,000 Freehold Property 4,00,000

Y 2,00,000 Trade Marks 20,000

Z 2,00,000 7,00,000 Goodwill 33,000

8,89,000 8,89,000

Z retires on 1st April, 2023 subject to the following adjustments :

(i) Freehold Property be valued at ₹5,80,000.
(ii) Investments be valued at ₹47,000; and stocks be valued at ₹94,000;
(iii) A provision of 5% be made for doubtful debts.
(iv) Trade Marks are valueless.
(v) An item of ₹ 12,000 included in creditors is not likely to be claimed.
(vi) Goodwill be valued at one year’s purchase of the average profit of the past three years.
Profits ending 31st March were : 2021 ₹ 1,20,000; 2022 ₹ 1,00,000 and 2023 ₹95,000.
Pass journal entries, give capital accounts and the balance sheet of the remaining partners.
[Ans. Profit on Revaluation ₹ 1,53,000; Z’s Loan A/c ₹2,95,000; Capitals X ₹3,42,500; Y
₹2,42,500; B/S total ₹9,97,000.]
Hints : (i) Goodwill appearing in the assets at ₹33,000 written off among all partners in old
ratio.
(ii) Z’s share of goodwill ₹35,000 debited to X and Y in gaining ratio i.e., equally.
Q. 35. P, Q and R were partners in a firm sharing profits in the ratio of 2 : 3 : 5. On 31-3-2021
their Balance Sheet was as follows :

Liabilities ₹ Assets ₹

Creditors 70,000 Bank 45,000

Capital Accounts : Debtors 40,000

P 80,000 Less: Provision for

Q 70,000 Doubtful Debts 5,000 35,000

R 60,000 2,10,000 Stock 50,000

Building 1,40,000

Profit and Loss A/c 10,000

2,80,000 2,80,000

On the above date R retired from the firm due to his illness on the following terms:
(i) Building was to be depreciated by ₹40,000.
(ii) Provision for doubtful debts was to be maintained at 20% on debtors.
(iii) Salary outstanding ₹5,000 was to be recorded and creditors ₹4,000 will not be claimed.
(iv) Goodwill of the firm was valued at ₹72,000.
(v) R was to be paid ₹ 15,000 in cash, through bank and the balance was to be transferred to
his loan account.
Prepare Revaluation Account, Partner’s Capital Accounts and the Balance Sheet of P and Q
after R's retirement.
[Ans. Loss on Revaluation ₹44,000; R's Loan A/c ₹54,000; Capital Accounts: P ₹ 54,800 and
Q ₹32,200; B/S Total ₹2,12,000.]
Q. 41. Manoj, Naveen and Deepak were partners sharing profits and losses in the ratio of 4 :
3 : 2. As at 1st April 2022, their Balance Sheet was as follows :

Liabilities ₹ Assets ₹

Trade Creditors 7,000 Cash in Hand 5,900

Capitals : Debtors 19,000

Manoj 50,000 Less : Provision 1,400 17,600

Naveen 39,000 Stock 13,500

Deepak 30,000 1,19,000 Plant and Machinery 18,000

Motor Car 20,000

Buildings 48,000

Goodwill 3,000

1,26,000 1,26,000

Deepak retired on the above date as per the following terms :

1. Goodwill of the firm was valued at ₹21,000.
2. Stock to be appreciated by 10%.
3. Provision for doubtful debts should be 5% on debtors.
4. Machinery is to be valued at 5% more than its book value.
5. Motor Car is revalued at ₹ 15,500. Retiring partner took over Motor Car at this value.
6. Deepak be paid ₹2,000 in cash and balance be transferred to his loan account.
Show necessary journal entries. Prepare Revaluation Account, Capital Accounts and Opening
Balance Sheet of continuing partners.
[Ans. Loss on Revaluation ₹ 1,800; Deepak’s Loan A/c ₹ 16,100; Capitals : Manoj ₹45,200;
Naveen ₹35,400; B/S total ₹ 1,03,700.]
Hint : Goodwill amounting to ₹3,000 will be written off among old partners in old ratio and
Deepak’s share in ₹21,000 will be debited to the accounts of Manoj and Naveen in gaining
ratio i.e., 4 : 3.
Q. 42. Anita, Gaurav and Sonu were partners in a firm sharing profits and losses in proportion
to their capitals. Their Balance Sheet as at 31st March, 2019 was as follows :
BALANCE SHEET OF ANITA, GAURAV AND SONU
 as at 31 st March, 2019

Liabilities Amount Assets Amount

₹ ₹

Capitals : Land and Building 5,00,000

Anita 2,00,000 Investments 1,20,000

Gaurav 2,00,000 Debtors 1,50,000

Sonu 1,00,000 5,00,000 Less : Provision for

Investment Fluctuation Reserve 40,000 Doubtful Debts 10,000 1,40,000

General Reserve 30,000 Stock 1,00,000

Creditors 4,60,000 Cash at Bank 1,70,000

10,30,000 10,30,000

On the above date, Anita retired from the firm and the remaining partners decided to carry on
the business. It was agreed to revalue the assets and reassess the liabilities as follows :
(i) Goodwill of the firm was valued at ₹3,00,000 and Anita’s share of goodwill was adjusted in
the capital accounts of the remaining partners, Gaurav and Sonu.
(ii) Land and Building was to be brought up to 120% of its book value.
(ii) Bad Debts amounted to ₹20,000. A provision for doubtful debts was to be maintained at
10% on debtors.
(iv) Market value of investments was ₹ 1,10,000.
(v) ₹ 1,00,000 was paid immediately by cheque to Anita out of the amount due and the balance
was to be transferred to her loan account which was to be paid in two equal annual instalments
along with interest @ 10% p.a.
Prepare necessary journal entries on 31st March, 2019.
(C.B.S.E. 2020, Kolkata, Lucknow)
[Ans. Profit on Revaluation ₹77,000; Amount transferred to Anita’s Loan A/c ₹2,74,800.]
Q. 43. Sameer, Yasmin and Saloni were partners in a firm sharing profits and losses in the
ratio of 4 : 3 : 3. On 31.3.2016, their Balance Sheet was as follows :
BALANCE SHEET OF SAMEER, YASMIN AND SALONI
as at 31.3.2016

Liabilities Amount Assets Amount

₹ ₹

Creditors 1,10,000 Cash 80,000

General Reserve 60,000 Debtors 90,000

Capitals : Less : Provision 10,000 80,000

Sameer 3,00,000 Stock 1,00,000

Yasmin 2,50,000 Machinery 3,00,000

Saloni 1,50,000 7,00,000 Building 2,00,000

Patents 60,000

Profit and Loss Account 50,000

8,70,000 8,70,000

On the above date, Sameer retired and it was agreed that :

(i) Debtors of ₹4,000 will be written off as bad debts and a provision of 5% on debtors for bad
and doubtful debts will be maintained.
(II) An unrecorded creditor of ₹20,000 will be recorded.
(iii) Patents will be completely written off and 5% depreciation will be charged on stock,
machinery and building.
(iv) Yasmin and Saloni will share future profits in the ratio of 3 : 2.
(v) Goodwill of the firm on Sameer’s retirement was valued at ₹5,40,000.
Pass necessary journal entries for the above transactions in the books of the firm on Sameer’s
retirement. (C.B.S.E. 2017)
[Ans. Loss on Revaluation ₹ 1,08,300; Amount transferred to Sameer’s Loan A/c ₹4,76,680]
Hint. Entry for bad-debts and provision for bad debts :
Provision for Bad Debts A/c Dr. 5,700
To Debtors A/c 4,000
To Revaluation A/c 1,700
Q. 44. Following is the Balance Sheet of A Land Z as at 31st March, 2022. They shared profits
in the ratio of 3 : 3 : 2.

Liabilities ₹ Assets ₹

Sundry Creditors 2,50,000 Cash at Bank 50,000

General Reserve 80,000 Bills Receivable 60,000

Partners Loan A/cs : Debtors 80,000

X 50,000 Less : Provision for

Y 40,000 Bad Debts 4,000 76,000

Capital A/cs : Stock 1,24,000

X 1,00,000 Fixed Assets 3,00,000

Y 60,000 Advertisement Suspense A/c 16,000

Z 50,000 2,10,000 Profit and Loss A/c 4,000

 6,30,000 6,30,000

On 1st April, 2022 Y decided to retire from the firm on the following terms :
(a) Stock to be depreciated by ₹ 12,000.
(b) Advertisement Suspense Account to be written off.
(c) Provision for Bad and Doubtful Debts to be increased to ₹6,000.
(cl) Fixed Assets be appreciated by 10%.
(e) Goodwill of the firm be valued at ₹ 80,000 and the amount due to the retiring partner be
adjusted in X’s and Z’s Capital Accounts.
Prepare the Revaluation Account, Partner’s Capital Accounts and the Balance Sheet to give
effect to the above.
[Ans. Profit on Revaluation ₹ 16,000; Y’s Loan A/c ₹ 1,58,500 (i.e. ₹40,000 + ₹ 1,18,500);
Capitals X₹ 1,10,500 and Z ₹57,000; B/S Total ₹6,26,000.]
Q. 45. X Y and Z were partners in a firm sharing profits in 5 : 3 : 2 ratio. On 31st March, 2020
Z retired from the firm. On the date of Z’s retirement the Balance Sheet of the firm was as
follows :
BALANCE SHEET OF X, Y AND Z as at 31st March, 2023

Liabilities ₹ Assets ₹

Creditors 27,000 Bank 80,000

Bills Payable 13,000 Debtors 20,000

Outstanding Rent 22,500 Less : Provision for

Provision for Legal Claims 57,500 Doubtful Debts 500 19.500

Capital A/cs : Stock 21,000

X 1,27,000 Furniture 87,500

Y 90,000 Land and Building 2,00,000

Z 71,000 2,88,000

4,08,000 4,08,000

On Z’s retirement it was agreed that:

(i) Land and Building will be appreciated by 5% and furniture will be depreciated by 20%.
(ii) Provision for doubtful debts will be made at 5% on debtors and provision for legal claims
will be made ₹60,000.
(iii) Goodwill of the firm was valued at ₹60,000.
(iv) ₹ 70,000 from Z’s Capital Account will be transferred to his loan account and the balance
will be paid to him by cheque.
Prepare Revaluation Account, Partner’s Capital Accounts and Balance Sheet of X and Y after
Z’s retirement.
[Ans. Loss on Revaluation ₹ 10,500; Balance amount paid to Z by cheque ₹ 10,900; Capital
Accounts X ₹ 1,14,250 and Y ₹82,350; Balance Sheet Total ₹3,89,100]
Q. 46. A, B and C are in partnership sharing profits in the ratio of 3 : 2 : 1. On 28th February,
2021 C retires from the firm. Their Balance Sheet on this date was as follows :

Liabilities ₹ Assets ₹

Sundry Creditors 1,20,000 Bank 25,000

Outstanding Expenses 10,000 Debtors 1,65,000

Profit & Loss Account 1,50,000 Stock 2,50,000

Capital Accounts : Investments 3,00,000

A 5,00,000 Fixed Assets 5,40,000

B 3,00,000

C 2,00,000 10,00,000

12,80,000 12,80,000

The following was agreed upon :

(i) Goodwill of the firm is valued at ₹ 1,50,000. C sells his share of goodwill to A and B in the
ratio of 4 : 1.
(ii) Stock is revalued at ₹3,00,000 and debtors are revalued at ₹ 1,50,000.
(iii) Outstanding expenses be brought down to ₹3,000,
(iv) Investments are sold at a loss of 10%.
(v) C is paid off in full.
Prepare Revaluation Account, Capital Accounts and the Balance Sheet of the new firm.
[Ans. Profit on Revaluation ₹ 12,000; Amount paid to C ₹2,52,000; A’s Capital ₹5,61,000; B's
Capital ₹3,49,000; B/S Total ₹ 10,33,000; Bank balance ₹43,000.]
Q. 47. On 31st March, 2022 the Balance Sheet of M/s A, B and C sharing profits and losses
in proportion to their fixed capitals stood as follows :

Liabilities ₹ Assets ₹

Creditors 1,08,000 Cash at Bank 80,000

General Reserv e 1,80,000 Debtors 1,00,000

Capital Acs : Less: Provision 2,000 98,000

A 3,60,000 Stock 90,000

B 2,40,000 Machinery 2,40,000

C 1,20,000 7,20,000 Land and Buildings 5,00,000

 10,08,000 10,08,000

On 1st April, 2022, B wants to retire from the firm and the remaining partners decide to carry
on. The following re-adjustments of assets and liabilities have been agreed upon before the
ascertainment of the amount payable to B :
(i) that, out of the Fire Insurance Premium paid during 2021-22, ₹ 10,000 be carried forward
as unexpired.
(ii) that the land and buildings be appreciated by 10%.
(iii) that provision for doubtful debts be brought upto 5% on debtors.
(iv) that the machinery be depreciated by 5%.
(v) that a provision for ₹ 15,000 be made in respect of an outstanding bill for repairs.
(vi) that the goodwill of the entire firm be at ₹ 1,80,000 and B's share of the same adjusted in
the A/cs of A and C who share future profits in the proportion of 3/4th and l/4th respectively;
and
(vii) that B be paid ₹50,000 in cash and the balance be transferred to his Loan A/c.
Prepare Revaluation A/c, Partner’s Current Accounts, Capital Accounts and the Balance
Sheet of the firm of A and C.
[Ans. Profit on Revaluation ₹30,000; B's Loan A/c ₹3,20,000; Current Accounts: A ₹60,000
(Cr.) and C ₹20,000 (Cr.); Capitals : A ₹3,60,000; C ₹ 1,20,000; B/S Total ₹ 10,03,000]
1 1 1
Q.48. X, Y and Z were partners in a firm sharing profits in the ratio of 2 ∶ 3
∶ 6
respectively.
The Balance Sheet of the firm as at 31st March, 2022 stood as follows :

Liabilities ₹ Assets ₹

Creditors 9,500 Cash at Bank 1,250

Bills Payable 2,500 Debtors 8,000

Reserve Fund 6,000 Less: Provision for

Capitals : Doubtful Debts 250 7,750

X 20,000 Stock 12,500

Y 15,000 Motor Vans 4,000

Z 12,500 47,500 Machinery 17,500

Buildings 22,500

65,500 65,500

Y retired from the firm on 1st April, 2022 subject to the following conditions :
(a) Goodwill of the firm be valued at ₹9,000.
(b) Machinery would be depreciated by 10% and motor vans by 15%.
(c) Stock would be appreciated by 20% and Buildings by 10%.
(d) The provision for doubtful debts would be increased by ₹975.
(e) Liability for workmen’s compensation to the extent of ₹825 would be created.
It was agreed that X and Z would share profits in future in the ratio of 3 : 2 respectively.
You are required to prepare the Revaluation Account, Capital Accounts of the partners and
the Balance Sheet of the firm after the retirement of Y.
[Ans. Profit on Revaluation ₹600; Y’s Loan A/c ₹20,200; Capital Accounts X ₹22,400 and Z ₹
11,500; Balance Sheet Total ₹66,925. Gaining Ratio 3 : 7.]
Adjustment of Capitals
Q. 49. A, B and C were in partnership sharing profits in proportion to their capitals. Their
Balance Sheet as at 31-3-2018 was as follows :

Liabilities ₹ Assets ₹

Creditors 15,600 Cash 16,000

Reserve 6,000 Debtors 20,000

A’s Capital 90,000 Less: Provision for

B’s Capital 60,000 Doubtful Debts 400 19,600

C’s Capital 30,000 Stock 18,000

Machinery 48,000

Buildings 1,00,000

2,01,600 2,01,600

On the above date B retired owing to ill health and the following adjustments were agreed
upon :
(a) Buildings be appreciated by 10%.
(b) Provision for bad and doubtful debts be increased to 5% on debtors.
(c) Machinery be depreciated by 15%.
(d) Goodwill of the firm be valued at ₹36,000 and be adjusted into the Capital Accounts of A
and C who will share profits in future in the ratio of 3 : 1.
(e) A provision be made for outstanding repairs bill of ₹3,000.
(f) Included in the value of creditors is ₹ 1,800 for an outstanding legal claim, which is not likely
to arise.
(g) Out of the insurance premium paid ₹2,000 is for the next year. The amount was debited to
P & L A/c.
(h) The partners decide to fix the capital of the new firm as ₹ 1,20,000 in the profit sharing
ratio.
O') B to be paid ₹9,000 in cash and the balance to be transferred to his Loan Account.
Prepare the Revaluation Account, Partner’s Capital Accounts and the Balance Sheet of the
new firm after B’s retirement. (C.B.S.E. Sample Paper, 2019)
[Ans. Profit on Revaluation ₹3,000; Capital Accounts A ₹90,000 and C ₹30,000; Deficit Capital
brought in by A ₹4,500 and C ₹ 1,500; Cash Balance ₹ 13,000; B/S Total ₹2,02,800.]
Q. 50. Mohan, Vinay and Nitya were partners in a firm sharing profits and losses in the
1 1 1
proportion of 2, 3 and 6 respectively. On 31st March, 2022, their Balance Sheet was as follows
:

Liabilities ₹ Assets ₹

Creditors 48,000 Cash at Bank 31,000

Employees’ Provident Fund 1,70,000 Bills Receivable 54,000

Contingency Reserve 30,000 Book Debts 63,000

Capitals : Less : Provision for

Mohan 1,20,000 Doubtful debts 2,000 61,000

Vinay 1,00,000 Plant and Machinery 1,20,000

Nitya 90,000 3,10,000 Land and Building 2.92,000

5,58,000 5.58,000

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

(i) Plant and Machinery will be depreciated by 5%.
(ii) An old computer previously written off was sold for ₹4,000.
(iii) Bad debts amounting to ₹3,000 will be written off and a provision of 5% on debtors for bad
and doubtful debts will be maintained.
(iv) Goodwill of the firm was valued at ₹ 1,80,000 and Mohan’s share of the same was credited
in his account by debiting Vinay’s and Nitya’s accounts.
(v) The capital of the new firm was to be fixed at ₹90,000 and necessary adjustments were to
be made by bringing in or paying off cash as the case may be.
(vi) Vinay and Nitya will share future profits in the ratio of 3 : 2.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the
reconstituted firm. (C.B.S.E. 2019, Rajasthan)
[Ans. Loss on Revaluation ₹6,000; Mohan’s Loan A/c ₹2,22,000; Capital Accounts : Vinay
₹54,000 and Nitya ₹ 36,000; Amount returned to Vinay ₹6,000 and to Nitya ₹ 16,000; B/S
Total ₹5,30,000.]
Hints : (1) Entry for Computer Sold :
Bank A/c Dr. 4,000
To Revaluation A/c 4,000
(2) (0 Bad Debts A/c Dr. 3,000
To Book Debts (Debtors) 3,000
(ii) Provision for Doubtful Debts A/c Dr. 2,000
Revaluation A/c (3,000 - 2,000) Dr. 1,000
To Bad Debts A/c 3,000
(Hi) Revaluation A/c Dr. 3,000
To Provision for Doubtful Debts A/c 3,000
Q. 51. The Balance Sheet of X, Y and Z who were sharing profit in proportion of capitals is as
follows :

Liabilities ₹ Assets ₹

Sundry Creditors 7,000 Cash at Bank 15,600

Capital A/cs: S. Debtors 5,000

X 25,000 Less: Provision 100 4,900

Y 20,000 Stock 10,000

Z 15,000 Plant and Machinery 11,500

Land and Building 25,000

67,000 67,000

Y retires and the following adjustments of the assets and liabilities have been made before
the ascertainment of the amount payable by the firm to Y:
(i) That the stock be depreciated by 5%.
(ii) That the provision for doubtful debts be increased to 5% on debtors.
(iii) That the land and building be appreciated by 20%.
(iv) That a provision of ₹750 be made in respect of outstanding legal charges.
(v) That the Goodwill of the entire firm be fixed at ₹ 16,200 and Y’s share of the same be
adjusted into the Accounts of X and Z.
(vi) That X and Z decide to share future profits of the firm in equal proportion.
(vii) That the entire capital of the new firm is fixed at ₹48,000 between X and Z in equal
proportions. For the purpose, actual cash is to be brought in or paid off.
You are required to prepare the Revaluation Account, Partner’s Capital Accounts, Bank
account and revised balance sheet after Y’s retirement. Also indicate the gaining ratio. .
[Ans. Profit on Revaluation ₹3,600; Y’s Loan Account ₹26,600; Capital A/cs—X ₹24,000 and
Z ₹24,000; Cash withdrawn by X ₹1,150; and cash brought in by Z ₹ 12,150; Bank Balance
— ₹26,600; Balance Sheet total ₹82,350.]
Q. 52. Following is the Balance Sheet of G, K & W as at 31st March, 2019 who share profits
in the ratio of 3 : 2 : 1.

Liabilities ₹ Assets ₹

Capital Accounts : Goodwill 7,500

G 22,000 Stock 12,500

K 13,000 Sundry Debtors 12,000

W 9,000 44,000 Land and Buildings 15,000

Sundry Creditors 10,000 Plant and Machinery 18,000

Bills Payable 4,000 Motor Vehicle 5,000

General Reserve 12,000

70,000 70,000

On 1st April, 2019, G retired and the following arrangements were agreed upon :
(1) Goodwill of the firm is to be valued at ₹ 15,000.
(2) The assets and liabilities are to be valued as under : Stock ₹ 10,000; Sundry Debtors ₹
11,500; Land and Buildings ₹ 18,000; Plant and Machinery ₹ 16,500; and Sundry Creditors
₹9,200.
(3) Liability for Workmen’s Compensation amounting to ₹500 is to be brought into the books.
(4) The entire capital of the firm as newly constituted be fixed at ₹35,000 between K and W in
the proportion of 4 : 3 and the actual cash to be paid off or to be brought in by continuing
partners as the case may be.
(5) ₹ 13,150 were paid to G. The balance due to him was to be paid in three equal instalments
annually together with interest @ 12% per annum.
Give necessary ledger accounts, the Balance Sheet of the firm after G’s retirement and G’s
Loan Account till it is finally paid off.
[Ans. Loss on Revaluation ₹1,200; Balance of G’s Loan A/c on 1st April, 2019 ₹ 18,000; Capital
Accounts : K ₹20,000 and If ₹ 15,000; Cash brought in by K ₹ 10,900 and W ₹7,950; Cash
Balance ₹5,700; B/S Total ₹66,700]
Hint : 4 : 3 is not the new profit sharing ratio.
Q.53. The Balance Sheet of A, B and C who were sharing profits in proportion to their capitals
stood as follows as at 31st March, 2022 :

Liabilities ₹ Assets ₹

Sundry Creditors 6,900 Cash at Bank 5,500

Investments Fluctuation Reserve 7,500 Sundry Debtors 5,000

Capital Accounts : Less : Provision 100 4,900

A 18,000 Stock 8,000

B 13,500 Investments 11,500

C 9,000 40,500 Land and Building 25,000

54,900 54,900

B retired on 1st April, 2022 and the following was agreed upon :
(i) That stock be depreciated by 6%.
(ii) That the Provision for Doubtful Debts be brought up to 5% on Debtors.
(iii) That Land and Buildings be appreciated by 20%.
(iv) That a provision of ₹770 be made in respect of outstanding legal charges.
(v) Investments are brought down to ₹8,500.
(vi) That the Goodwill of the entire firm be fixed at ₹ 10,800 and B's share of goodwill be
adjusted into the accounts of A and C who are going to share future profits in the ratio of 5 :
3.
(vii) That the entire capital of the firm as newly constituted be fixed at ₹28,000 between A and
C in the proportion of 5 : 3 (actual cash to be brought in or paid off, as the case may be).
Pass Journal entries and show
54..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 :

Liabilities ₹ Assets ₹

Trade Creditors 1,60,000 Land and Building 10,00,000

Bank Overdraft 44,000 Machinery 5,00,000

Long-term Debts 4,00,000 Furniture 7,00,000

Employees' Provident Fund 76,000 Investments 2,00,000

Capitals : Leena 12,50,000 Closing Stock 8,00,000

Madan 8,00,000 Sundry Debtors 4,00,000

Naresh 10,50,000 31,00,000 Bank 80,000

Deferred Advertisement

Expenditure 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:
(i) Land and Building be appreciated by ₹2,40,000 and Machinery be depreciated by 10%.
(ii) 50% of Investments were taken over by the retiring partner at book value.
(iii) An old customer Mohit whose account was written off as bad debt has promised to pay
₹7,000 in settlement of his full debt of ₹ 10,000.
(iv) Provision for Doubtful Debts was to be made at 5% on debtors.
(v) Closing Stock will be valued at market price which is ₹ 1,00,000 less than the
book value. .
(vi) Goodwill of the film 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.
(vii) 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.
(viii) 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. (C.B.S.E. 2016, Comptt.)

Q. 55. On 31st March, 2021, the Balance Sheet of Saman, Harish and Meeta who were
sharing profits and losses in the ratio of 2 : 3 : 2, stood as follows :
BALANCE SHEET
as at 31st March, 2021

Liabilities ₹ Assets ₹

Capitals : Saman 10,00,000 Land and Buildings 19,00,000

Harish 15,00,000 Machinery 5,00,000

Meeta 10,00,000 35,00,000 Furniture 7,70,000

Workmen Compensation Reserve 8,40,000 Closing Stock 5,00,000

Sundry Creditors 5,10,000 Sundry Debtors 7,00,000

Cash 4,80,000

48,50,000 48,50,000

On 31st March, 2021, Harish retired from the firm and the remaining partners decided to carry
on the business. It was agreed to revalue the assets and liabilities as follows :
(i) Land and buildings be appreciated by 20%.
(ii) Machinery be depreciated by 20%.
(iii) Closing stock be valued at ₹4,50,000.
(iv) Provision for Doubtful Debts be made at 5% on Debtors.
(v) Sundry creditors of ₹65,000 be written off.
(vi) Goodwill of the firm be valued at ₹5,60,000 and Harish’s share of the goodwill be adjusted
in the accounts of Saman and Meeta who will share the future profits and losses in the ratio
of 3 : 2.
(vii) The total capital of the newly constituted firm will be ₹35,00,000, which will be adjusted
by opening Current Accounts.
(viii) Amount due to Harish 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 new firm
on Harish’s retirement.
[Ans. Profit on Revaluation ₹2,60,000; Bills Payable accepted ₹22,11,428; Capital A/cs :
Saman ₹21,00,000 and Meeta ₹ 14,00,000; Current A/cs Saman (Dr.) ₹9,61,714 and Meeta
(Dr.) ₹1,49,714; B/S Total ₹61,56,428.]
Q. 56. Ajay, Vijay and Sanjay are partners in a firm sharing profits and losses in the ratio of 5
: 4 : 3. Vijay retires. After making all adjustments relating to revaluation, goodwill and
accumulated profits, etc. the capital account of Ajay showed a credit balance of ₹2,00,000 and
that of Sanjay ₹ 1,00,000. It was decided to adjust the capitals of Ajay and Sanjay in their profit
sharing ratio. You are required to calculate the new capital of the partner’s and record
necessary entry for surplus/deficit.
[Ans. Ajay will withdraw ₹ 12,500 and Sanjay will bring in ₹ 12,500.]
Q. 57. X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 2 : 1. On April 1 st
2021, X retires from the firm, Y and Z agree that the capital of the new firm shall be fixed at
₹2,10,000 in the profit sharing ratio. The Capital Accounts of Y and Z after all adjustments on
the date of retirement showed balances of ₹ 1,45,000 and ₹ 63,000 respectively. State the
amount of actual cash to be brought in or to be paid to the partners.
[Ans. Y will withdraw ₹5,000 and Z will bring in ₹7,000.]
Q. 58. Akul, Bakul and Chandan were partners in a firm sharing profits in the ratio of 2 : 2 : 1.
On 31st March, 2018 their Balance Sheet was as follows :
BALANCE SHEET OF AKUL, BAKUL AND CHANDAN
as at 31-3-2018

Liabilities ₹ Assets ₹

Sundry Creditors 45,000 Cash at Bank 42,000

Employees Provident Fund 13,000 Debtors 60,000

General reserve 20,000 Less : Provision for

Capitals :' doubtful debts 2,000 58,000

Akul 1,60,000 Stock 80,000

Bakul 1,20,000 Furniture 90,000

Chandan 92,000 3,72,000 Plant and Machinery 1,80,000

4,50,000 4,50,000

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

(i) Plant and Machinery was undervalued by 10%.
(ii) Provision for doubtful debts was to be increased to 15% on debtors.
(iii) Furniture was to be decreased to ₹87,000.
(IV) Goodwill of the firm was valued at ₹ 3,00,000 and Bakul’s share was to be adjusted through
the capital accounts of Akul and Chandan.
(v) Capital of the new firm was to be in the new profit sharing ratio of the continuing partners
(actual cash to be brought in or paid off, as the case may be.)
Prepare Revaluation account, Partners’ Capital accounts and the Balance Sheet of the
reconstituted firm. (C.B.S.E. 2019, M.P. )
[Ans. Profit on Revaluation ₹ 10,000; Bakul’s Loan ₹2,52,000; Capital Accounts Akul ₹
1,00,000 and Chandan ₹50,000; Cash brought in by Akul ₹8,000 and withdrawn by Chandan
₹8,000; Balance Sheet Total ₹4,60,000.]
Q. 59. G, E and F were partners in a firm sharing profits in the ratio of 7 : 2 : 1. The Balance
Sheet of the firm as at 31st March, 2018, was as follows :
BALANCE SHEET OF G, E AND F
as at 31st March, 2018

Liabilities ₹ Assets

Capitals : Cash 90,000

G 1,40,000 Sundry Debtors 24,000

E 40,000 Stock 14,000

F 20,000 2,00,000 Machinery 80,000

Creditors 28,000 Land and Building 1,20,000

General Reserve 40,000

Loan from E 60,000

3,28,000 3,28,000

E retired on the above data. On E's retirement the following was agreed upon :
(i) Land and Building were revalued at ₹ 1,88,000, Machinery at ₹76,000 and Stock at ₹ 10,000
and goodwill of the firm was valued at ₹90,000.
(ii) A provision of 2.5% was to be created on sundry debtors for doubtful debts.
(iii) The net amount payable to E was transferred to his loan account to be paid later on.
(iv) Total capital of the new firm was fixed at ₹2,40,000 which will be adjusted according to
their new profit sharing ratio by opening current accounts.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of
reconstituted firm. (C.B.S.E. 2019, Kerala)
[Ans. Profit on Revaluation ₹59,400; E’s loan ₹ 1,37,880; Capital Accounts G ₹2,10,000 and
F ₹30,000; G’s Current A/c (Dr.) ₹ 16,170; F’s Current A/c (Dr.) ₹2,310; Balance Sheet Total
₹4,05,880.]
60 Lisa, Monika and Nisha were partners in a firm sharing profits and losses in the ratio of 2 :
2 : 1. On 31st March, 2019, their Balance Sheet was as follows:
BALANCE SHEET OF LISA, MONIKA AND NISHA as at 31stMarch, 2019

Liabilities ₹ Assets ₹

Trade Creditors 1,60,000 Land and Building 10,00,000

Bills Payable 2,44,000 Machinery 12,00,000

Employees' Provident 76,000 Stock

Fund 10,00,000

Capitals: Sundry Debtors 4,00,000

Lisa 14,00,000 Bank 40,000

Monika 14,00,000

Nisha 3,60,000 31,60,000

36,40,000 36,40,000

On 31st March, 2019, Monika retired from the firm and the remaining partners decided to carry
on the business. It was agreed that:
(i) Land and building be appreciated by ₹ 2,40,000 and machinery be depreciated by 10%.
(ii) 50% of the stock was taken over by the retiring partner at book value.
(iii) Provision for doubtful debts was to be made at 5% on debtors.
(iv) Goodwill of the firm be valued at ₹ 3,00,000 and Monika's share of goodwill be adjusted in
the accounts of Lisa and Nisha.
(v) The total capital of the new firm be fixed at ₹ 27,00,000 which will be in the proportion of
the new profit- sharing ratio of Lisa and Nisha. For this purpose, Current Accounts of the
partners were to be opened.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the
reconstituted firm on Monika's retirement. (CBSE 2019 C)
[Ans.: Gain (Profit) on Revaluation—₹ 1,00,000; Monika's Loan Account—₹ 10,60,000;
Partners' Capital Accounts: Lisa—₹ 18,00,000; Nisha—₹ 9,00,000; Partners' Current
Accounts: Lisa—₹ 4,40,000 (Dr.); Nisha—₹ 5,60,000 (Dr.); Balance Sheet Total—₹
42,40,000.]
61.. On 31st March, 2023, the Balance Sheet of A, B and C who were sharing profits and
losses in proportion to their capitals stood as:

Liabilities ₹ Assets ₹

Creditors 10,800 Cash at Bank 13,000

Outstanding Expenses 5,000 Debtors 10,000

Less: Provision for Doubtful

Capital A/cs: Debts 200 9,800

A 45,000 Stock 9,000

B 30,000 Machinery 24,000

C 15,000 90,000 Freehold Premises 50,000

1,05,800 1,05,800

B retired on 1st April, 2023 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.
[Ans.: Gain (Profit) on Revaluation—₹ 3,000; B's Loan—₹ 32,000; Partners' Capital
Accounts: A—₹ 45,000;
C—₹ 15,000; Cash brought in by A—₹ 3,000 and C—₹ 1,000; Balance Sheet Total—₹
1,09,300.]
62. X, Y and Z were in partnership sharing profits in proportion to their capitals. Their Balance
Sheet as on 31st March, 2018 was as follows:

Liabilities ₹ Assets ₹

Sundry Creditors 16,600 Cash 15,000

Workmen's Compensation
9,000 Debtors 21,000
Fund

Less: Provision for Doubtful

General Reserve 6,000 Debts (1,400) 19,600

Capitals: Stock 19,000

X 90,000 Machinery 58,000

Y 60,000 Building 1,00,000

Z 30,000 1,80,000

2,11,600 2,11,600

On the above date, Y retired owing to ill health. The following adjustments were agreed upon
for calculation of amount due to Y:
(a) Provision for Doubtful Debts to be increased to 10% of Debtors.
(b) Goodwill of the firm be valued at ₹ 36,000 and be adjusted into the Capital Accounts of X
and Z, who will share profits in future in the ratio of 3 :1.
(c) Included in the value of Sundry Creditors was ₹ 2,500 for an outstanding legal claim, which
will not arise.
(d) X and Z also decided that the total capital of the new firm will be ₹ 1,20,000 in their profit-
sharing ratio. Actual cash to be brought in or to be paid off as the case may be.
(e) Y to be paid ₹ 9,000 immediately and balance to be transferred to his Loan Account.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm
after Y’s retirement. (CBSE Sample Paper 2019)
[Ans.: Gain (Profit) on Revaluation—₹ 1,800; Y's Loan A/c—₹ 68,600; Partners’ Capital
Accounts: X—₹ 90,000; Z—₹ 30,000; Total of Balance Sheet of New Firm—₹ 2,02,700.]
63. On March 31, 2020, the balance sheet of Pawan, Qatir and Ram, who were sharing profits
in proportion to their capitals stood as follows :
BALANCE SHEET
as at March 31, 2020

Liabilities ₹ Assets ₹

Creditors 48,200 Land and Buildings 50,000

General Reserve 6,000 Cash at Bank 30,000

Capitals : Debtors 40,000

Pawan 30,000 Less : Provision for

Qatir 30,000 Doubtful debts 2,000 38,000

Ram 15,000 75,000 Stock 14,000

Employee’s P.F. 17,000 Machinery 8,200

Profit and Loss 6,000

1,46,200 1,46,200

Qatir retires and the following readjustments of the assets and liabilities have been agreed
upon before the ascertainment of the amount payable to Qatir :
(i) That out of the amount of insurance which was debited entirely to profit and loss account,
₹4,320 be carried forward as unexpired insurance.
(ii) Thai the land and building be appreciated by 20%.
(iii) An amount of ₹ 10,000 included in Debtors to be written off as it is no longer receivable.
Provision for Doubtful Debts be maintained at the existing rate.
(iv) That machinery be depreciated by 10%.
(v) That the goodwill of the firm will be valued at ₹ 18,000.
(vi) That the entire capital of the firm as newly constituted be fixed at ₹60,000 between Pawan
and Ram in the proportion of three-fourth and one-fourth after passing entries in their accounts
for adjustment, i.e. actual cash to be paid off or to be brought in by the continuing partners as
the case may be.
(vii) That Qatir be paid ₹5,000 in cash and the balance be transferred to his loan account
payable in two equal annual instalments alongwith interest @ 8% p.a.
Prepare necessary accounts and the balance sheet of the firm of Pawan and Ram.
64. X, Y and Z were in partnership sharing profits in proportion to their capitals. Their Balance
Sheet as on 31st March, 2018 was as follows:
Liabilities ₹ Assets ₹

Sundry Creditors 16,600 Cash 15,000

Workmen's
Compensation Fund 9,000 Debtors 21,000

Less: Provision for Doubtful

General Reserve 6,000 Debts (1,400) 19,600

Capitals: Stock 19,000

X 90,000 Machinery 58,000

Y 60,000 Building 1,00,000

Z 30,000 1,80,000

2,11,600 2,11,600

On the above date, Y retired owing to ill health. The following adjustments were agreed upon
for calculation of amount due to Y:
(i) Provision for Doubtful Debts to be increased to 10% of Debtors.
(ii) Goodwill of the firm be valued at ₹ 36,000 and be adjusted into the Capital Accounts of X
and Z, who will share profits in future in the ratio of 3 :1.
(iii) Included in the value of Sundry Creditors was ₹ 2,500 for an outstanding legal claim, which
will not arise.
(iv) X and Z also decided that the total capital of the new firm will be ₹ 1,20,000 in their profit-
sharing ratio. Actual cash to be brought in or to be paid off as the case may be.
(v) Y to be paid ₹ 9,000 immediately and balance to be transferred to his Loan Account.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm
after Y's retirement. (CBSE Sample Paper 2019)
Q. 65. Following is the Balance Sheet of Kusum, Sneh and Usha as at 31 st March 2022, who
have agreed to share profits and losses in proportion of their capitals.
Balance Sheet of Kusum, Sneh and Usha
as at 31st March, 2022

Liabilities ₹ Assets ₹

Capitals : Land and Building 4,00,000

Kusum : 4,00,000 Machinery 6,00,000

Sneh : 6,00,000 Closing Stock 2,00,000

Usha : 4,00,000 14,00,000 Sundry Debtors 2,20,000

Employee’s Provident Fund 70,000 Less : Provision for

Workmen Compensation Doubtful debts 20,000 2,00,000

Reserve 30,000 Cash at Bank 2,00,000

Sundry' Creditors 1,00,000

16,00,000 16,00,000

On 31st March, 2022 Kusum desired to retire from the firm and the remaining partners decided
to carry on the business. It was agreed to revalue the assets and re-assess the liabilities on
that date, on the following basis :
(i) Land and Building be appreciated by 30%.
(ii) Machinery be depreciated by 30%.
(iii) There were Bad debts of ₹35,000.
(iv) The claim on account of Workmen Compensation Reserve was estimated at ₹15,000.
(v) Goodwill of the firm was valued at ₹2,80,000 and Kusum’s share of goodwill was adjusted
against the Capital Accounts of the continuing partners Sneh and Usha who have decided to
share future profits in the ratio of 3 : 4 respectively.
(vi) Capital of the new firm in total will be the same as before the retirement of Kusum and will
be in the new profit sharing ratio of the continuing partners.
(vii) Amount due to Kusum be settled by paying ₹ 1,00,000 in cash and balance by transferring
to her loan A/c which will be paid later on.
Prepare Revaluation Account, Capital Accounts Partners and Balance Sheet of the new firm
after Kusum’s retirement.
[Ans. Loss on Revaluation ₹75,000; Kusum’s Loan A/c ₹3,62,857; Final Capitals of Sneh
₹6,00,000 and Usha ₹8,00,000; Amount brought in by Sneh ₹25,715 and Usha ₹4,97,142;
Bank balance ₹6,22,857; B/S Total ₹19,47,857.]
Q. 66. Kushal, Kumar and Kavita were partners in a firm sharing profits in the ratio of 3 : 1 : 1.
On 1st April, 2023 their Balance Sheet was as follows :
Balance Sheet of Kushal, Kumar and Kavita
as at 1st April, 2023

Liabilities ₹ Assets ₹

Creditors 1,20,000 Cash 70,000

Bills Payable 1,80,000 Debtors 2,00,000

General Reserve 1,20,000 Less : Provision 10,000 1,90,000

Capitals : Stock 2,20,000

Kushal 3,00,000 Furniture 1,20,000

Kumar 2,80,000 Building 3',00,000

Kavita 3,00,000 8,80,000 Land 4,00,000

 13,00,000 13,00,000

On the above date Kavita retired and the following was agreed :
(i) Goodwill of the firm was valued at ₹40,000.
(ii) Land was to be appreciated by 30% and building was to be depreciated by ₹ 1,00,000.
(iii) Value of furniture was to be reduced by ₹20,000.
(iv) Bad debts provision is to be increased to ₹ 15,000.
(v) 10% of the amount payable to Kavita was paid in cash and the balance was transferred to
her Loan Account.
(vi) Capitals of Kushal and Kumar will be in proportion to their new profit sharing ratio. The
surplus/deficit, if any in their Capital Accounts will be adjusted through Current Accounts.
Prepare Revaluation Account, Partner’s Capital Accounts and Balance Sheet of Kushal and
Kumar after Kavita’s retirement.
[Ans. Loss on Revaluation ₹5,000; Kavita’s Loan Account ₹2,97,900; Capital A/cs : Kushal
₹4,98,000; Kumar ₹ 1,66,000; Current A/cs : Kushal ₹1,35,000 (Dr.); Kumar ₹ 1,35,000 (Cr.);
Balance Sheet Total ₹ 13,96,900.]
Q. 67. Radha, Manas and Amav were partners in a firm sharing profits and losses in the ratio
of 3 : 1 : 1. Their Balance Sheet as at 31st March, 2019 was as follows:
BALANCE SHEET OF RADHA, MANAS AND ARNAV
as at 31st March, 2019

Liabilities ₹ Assets ₹

Capitals : Furniture 4,60,000

Radha 4,00,000 Investments 2,00,000

Manas 3,00,000 Stock 2,40,000

Amav 2,00,000 9,00,000 Sundry Debtors 2,20,000

Investment Fluctuation Fund 1,10,000 Less: Provision for

Creditors 2,50,000 Doubtful Debts 10,000 2,10,000

Cash 1,50,000

12,60,000 12,60,000

Manas retired on 1st April, 2019. It was agreed that:

(i) Stock was to be appreciated by 20%.
(ii) Provision for doubtful debts was to be increased to ₹ 15,000.
(iii) Value of furniture was to be reduced by ₹3,000.
(iv) Market value of investments was ₹ 1,90,000.
(v) Goodwill of the firm was valued at ₹2,00,000 and Manas’s share was adjusted in the
accounts of Radha and Amav.
(vi) Manas was paid ₹68,000 in cash and the balance was transferred to his loan account.
(vii) Capitals of Radha and Amav were to be in proportion to their new profit sharing ratio.
Surplus/deficit, if any, in their capital accounts was to be adjusted through current accounts.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the
reconstituted firm. (C.B.S.E. 2020, Rajasthan)
[Ans. Profit on Revaluation ₹40,000; Manas Loan A/c₹3,00,000; Capital A/cs : Radha
₹5,04,000 and Amav ₹ 1,68,000; Current A/cs : Radha ₹50,000 (Dr.), Amav ₹50,000 (Cr.);
Balance Sheet Total ₹ 12,72,000.]
68. Amit, Balan and Chander were partners in a firm sharing profits in the proportion of 1/2,
1/3 and 1/6 respectively. Chander retired on 1st April, 2014. The Balance Sheet of the firm on
the date of Chander's retirement was as follows:

Liabilities ₹ Assets ₹

Sundry Creditors 12,600 Bank 4,100

Employees' Provident 3,000 Debtors 30,000

Fund

General Reserve 9,000 Less: Provision 1,000 29,000

Capital A/cs: Stock 25,000

Amit 40,000 Investments 10,000

Balan 36,500 Patents 5,000

Chander 20,000 96,500 Machinery 48,000

1,21,100 1,21,100

It was agreed that:

(i) Goodwill will be valued at ₹ 27,000.
(ii) Depreciation of 10% was to be provided on Machinery.
(iii) Patents were to be reduced by 20%.
(iv) An old photocopier previously written off was sold for ₹ 600.
(v) Chander took over Investments for ₹ 15,800.
(vi) Amit and Balan decided to adjust their capitals in proportion of their profit-sharing ratio by
opening Current Accounts.
Prepare Revaluation Account and Partners’ Capital Accounts on Chander's retirement. (Delhi
2015, Modified)
[Ans.: Gain (Profit) on Revaluation—₹ 600; Chander's Loan A/c—₹ 10,300; Partners' Capital
Accounts:
Amit—₹ 48,000; Balan—₹ 32,000. Current Accounts: Amit—₹ 5,900 (Dr.); Balan—₹ 5,900
(Cr.).]
[Hint: Adjusted Old Capital of Amit ₹ 42,100 and of Balan ₹ 37,900; Total Capital of New Firm
₹ 80,000.]
69. N, S and B were partners in a firm sharing profits and losses in proportion of 1/2,1/6 and
1/3 respectively. The Balance Sheet of the firm as at 31st March, 2017 was as follows:
BALANCE SHEET OF N, S AND B
as at 31st March, 2017

Liabilities ₹ Assets ₹

Capitals: Freehold Premises 40,000

N 30,000 Machinery 30,000

S 30,000 Furniture 12,000

B 28,000 88,000 Stock 22,000

Bills Payable 12,000 Sundry Debtors 20,000

Less: Provision for Bad

General Reserve 12,000 Debts 1,000 19,000

Sundry Creditors 18,000 Cash 7,000

1,30,000 1,30,000

B retired from the business on the above date and the partners agreed to the following:
(i) Freehold premises and stock were to be appreciated by 20% and 15% respectively.
(ii) Machinery and furniture were to be depreciated by 10% and 7% respectively.
(iii) Provision for bad debts was to be increased by ₹ 1,500.
(iv) On B's retirement goodwill of the firm was valued at ₹ 21,000.
(v) The continuing partners decided to adjust their capitals in their new profit-sharing ratio after
retirement of B. Surplus/deficit, if any, in their Capital Accounts was to be adjusted through
their Current Accounts.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the
reconstituted firm. (CBSE 2019)
[Ans.: Gain (Profit) on Revaluation—₹ 5,960; Amount transferred to B's Loan A/c—₹ 40,987;
Partners' Capital Accounts: N—₹ 48,730; S—₹ 16,243; N's Current A/c (Dr. Balance)—₹
15,000;
S's Current A/c (Cr. Balance)—₹ 15,000; Balance Sheet Total—₹ 1,50,960.]
70.(Adjustment of Capital through Current Accounts).
P, Q and R were partners in a firm sharing profits in the ratio of 3 : 2 : 1 respectively. On 31st
March, 2022, the balance sheet of the firm stood as follows:
BALANCE SHEET as at 31stMarch, 2022

Liabilities ₹ Assets ₹

Creditors 13,000 Cash 4,700

Bills Payable 590 Debtors 8,000

Capital A/cs: Stock 11,690

P 15,000 Buildings 23,000

Q 10,000 Profit & Loss Account 1,200

R 10,000 35,000

48,590 48,590

Q retired on the above-mentioned date on the following terms:

(i) Buildings to be appreciated by ₹ 7,000.
(ii) A provision for doubtful debts to be made at 5% on debtors.
(iii) Goodwill of the firm is valued at ₹ 18,000 and adjustment to be made by raising and writing
off the goodwill.
(iv) ₹ 2,800 was to be paid to Q immediately and the balance in his capital account to be
transferred to his loan account carrying interest as per the agreement.
(v) Remaining partners decided to maintain equal capital balances, by opening current
account. Prepare the Revaluation Account and Partners' Capital Accounts. (CBSE Sample
Paper 2023) Solution:

Q.71. X, Y and Z were partners in a firm sharing profits as in the ratio of 5 : 3 : 2. On 31-3-
2019 their Balance Sheet was as follows :
Balance Sheet of X, Y and Z as at 31st March, 2015

Liabilities ₹ Assets ₹

Creditors 21,000 Land and Building 62,000

Investment Fluctuation Fund 10,000 Motor Vans 20,000

Profit & Loss Account 40,000 Investments 19,000

Capitals : Machinery 12,000

X 50,000 Stock 15,000

Y 40,000 Debtors 40,000

Z 20,000 1,10,000 Less : Provision 3,000 37,000

Cash 16,000

1,81,000 1,81,000

On the above date, Y retired and X and Z agreed to continue the business on the following
terms :
1. Goodwill of the firm was valued at ₹51,000.
2. There was a claim of ₹4,000 for Workmen’s Compensation.
3. Provision for bad debts was to be reduced by ₹ 1,000.
4. Y will be paid ₹8,200 in cash and the balance will be transferred in his loan account which
will be paid in four equal yearly instalments together with interest @10% p.a.
5. The new profit sharing ratio between X and Z will be 3 : 2 and their capitals will be in their
new profit sharing ratio. The capital adjustments will be done by opening current accounts.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the
reconstituted firm. (C.B.S.E. 2020, Delhi)
Q. 72. P, Q and R were partners sharing profits and losses in the ratio of 5 : 3 : 2
respectively. As at 31st March, 2022 the Balance Sheet of the firm stood as follows :

Liabilities ₹ Assets ₹

Sundry Creditors 5,300 Fixed Assets 25,000

Expenses Outstanding 700 Stock 11,000

Reserve 3,000 Book Debts 9,000

Capitals : Cash at Bank 2,000

P 20,000

Q 10,000

R 8,000 38,000

47,000 47,000

On this date Q decided to retire and for this purpose :

(a) Goodwill was valued at ₹ 19,000;
(b) Fixed assets were valued at ₹30,000;
(c) Stock was considered as worth ₹ 10,000.
Q was to be paid through cash, brought in by P and R, in such a way as to make their capitals
proportionate to their new profit sharing ratio which was to be P 3/5 and R 2/5.
Record these matters in the journal of the firm and prepare the resultant Balance Sheet.
[Ans. Profit on revaluation ₹4,000; Amount paid to Q ₹ 17,800; Capital A/cs: P ₹27,000, R ₹
18,000 and Balance Sheet total ₹51,000; Gaining Ratio 1 : 2.]
Hints : Total Capital of the new Finn = ₹21,600 + ₹17,800 + ₹5,600 = ₹45,000
3
P’s Capital in the new firm = ₹45,000 × = ₹27,000
5
2
R’s Capital in the new' firm = ₹45,000 × 5 = ₹ 18,000
Cash brought in by P = ₹27,000 - ₹21,600 = ₹ 5,400
Cash brought in by R = ₹ 18,000 - ₹ 5,600 = ₹ 12,400
Q.73 .A, B and C are partners sharing profits and losses in the ratio of 5 : 3 : 2. "heir Balance
Sheet as at 31st March, 2022 was as follows :
 Liabilities ₹ Assets ₹

Sundry Creditors 29,000 Goodwill 24,000

Provision for Doubtful Debts 5,000 Debtors 80,000

Capitals : Investments 30,000

A 1,40,000 Land & Building 1,42,000

B 90,000 Machinery 50,000

C 76,000 3,06,000 Patents 4,000

Cash at Bank 10,000

3,40,000 3,40,000

C retired on 1st April, 2022 as per the following conditions :

(i) Goodwill of the firm is to be valued at three years purchase of the average profits of the last
five years which were ₹20,000; ₹ 12,000; ₹30,000; ₹ 6,000 (loss) and ₹34,000 respectively.
(ii) Machinery is to be reduced to ₹40,000 and patents are valueless.
(iii) There is no need of any provision for doubtful debts.
(iv) An unclaimed liability of ₹2,000 is to be written off.
(v) Out of the total insurance premium paid, ₹ 1,000 be treated as pre-paid.
(vi) Investments are revalued at ₹ 16,000 and these are taken by C at this value.
Entire sum payable to C is to be brought in by A and B in such a way so as to make their
capitals proportionate to their new profit sharing ratio which is 2 : 1.
Prepare Revaluation Account, Capital Accounts and the opening Balance Sheet of A and B.
[Ans. Loss on Revaluation ₹20,000; Amount paid to C ₹62,000; Final Balances of Capital
Accounts A ₹ 1,64,000 and B ₹82,000; Cash brought in by A ₹55,000 and by B ₹7,000; B/S
Total ₹2,73,000]
74. Balance Sheet of X, Y and Z who shared profits in the ratio of 5 : 3 : 2, as on 31st March,
2023 was as follows:

Liabilities ₹ Assets ₹

Sundry Creditors 39,750 Bank (Minimum Balance) 15,000

Employees' Provident Fund 5,250 Debtors 97,500

Workmen Compensation
Reserve 22,500 Stock 82,500

Capital A/cs: Fixed Assets 1,87,500

X 1,65,000

Y 84,000
Z 66,000 3,15,000

3,82,500 3,82,500

Y retired on 1st April, 2023 and it was agreed that:

(i) Goodwill of the firm is valued at ₹ 1,12,500 and Y’s share of it be adjusted into the Capital
Accounts of
X and Z who are going to share future profits in the ratio of 3 : 2.
(ii) Fixed Assets be appreciated by 20%.
(iii) Stock be reduced to ₹ 75,000.
(iv) Y be paid amount brought by X and Z so as to make their capitals proportionate to their
new profit- sharing ratio.
Prepare Revaluation Account, Capital Accounts of all partners and the Balance Sheet of the
New Firm.
[Ans.: Gain (Profit) on Revaluation—₹ 30,000; Capital Accounts: X—₹ 2,20,500; Z—₹
1,47,000;
Amount Paid to Y—₹ 1,33,500; Balance Sheet Total—₹ 4,12,500; Gaining Ratio— 1:2;
X Pays—₹ 40,500; Z Pays—₹ 93,000.]

Q. 75. P, Q and R are in partnership sharing profits in the ratio of 3 : 2 : 1. R retires. Following
balances appeared in their books :

₹ ₹

Goodwill 12,000

Bank 10,000

Other Assets 70,000

Creditors 14,000

Capitals: P 40,000

Q 20,000

R 18,000

92,000 92,000

Goodwill is agreed at ₹30,000. Sufficient money is to be introduced so that R is paid off and
leave ₹4,000 in cash at bank. P and Q are to provide such sum as will make their capitals
proportionate to their share of profits.
Prepare necessary entries and the new balance sheet.
[Ans. Amount paid to R ₹21,000; Final Capitals P ₹36,000; Q ₹24,000. P brings in ₹5,000 and
Q ₹ 10,000. B/S total ₹74,000.]
76.The Balance Sheet of X, Y and Z who were sharing profits in the ratio of 5 : 3 : 2 as at
March 31, 2022 :

Liabilities ₹ Assets ₹

Creditors 50,000 Cash at Bank 40,000

Employee’s Provident Fund 10,000 Sundry Debtors 1,00,000

Profit & Loss A/c 85,000 Stock 80,000

Capital A/cs : Fixed Assets 60,000

X 40,000

Y 62,000

Z 33,000 1,35,000

2,80,000 2,80,000

X retired on March 31, 2022 and Y and Z decided to share profits in future in the ratio of 2 : 3
respectively.
The other terms on retirement were as follows :
(i) Goodwill of the firm is to be valued at ₹ 80,000.
(ii) Fixed Assets are to be reduced to ₹57,500.
(iii) Make a provision for doubtful debts at 5% on debtors.
(iv) A liability for claim, included in creditors for ₹ 10,000, is settled and paid at ₹8,000.
The amount to be paid to X by Y and Z in such a way that their Capitals are proportionate to
their profit sharing ratio and leave a balance of ₹ 15,000 in the Bank Account.
Prepare Profit and Loss Adjustment Account and Partners’ Capital Accounts.

Q. 77. A. B and C were equal partners. Their Balance Sheet as at 31st March, 2022 was as
under :
BALANCE SHEET as at 31-03-2022

Liabilities ₹ Assets ₹

B/P 20,000 Bank 20,000

Creditors 40,000 Stock 20,000

General Reserve 30,000 Furniture 28,000

P/L 6,000 Debtors 45,000

Capitals : Less : RBDD 5,000 40,000

A 60,000 Land & Building 1,20,000

B 40,000

C 32,000 1,32,000

2,28,000 2,28,000

B retired on 1st April, 2022. A and C decided to continue the business sharing profits in the
ratio of 3 : 2. Following terms were agreed :
(a) Goodwill of the firm was valued at ₹57,600.
(b) Reserve for bad and doubtful debts to be maintained at 10% on debtors.
(c) Land and building to be increased to ₹ 1,32,000.
(d) Furniture to be reduced by ₹8,000.
(e) Rent outstanding (not provided for as yet) was ₹ 1,500.
Remaining partners decided to bring sufficient cash in the business to pay off B and to maintain
a bank balance of ₹24,800. They also decided to readjust their capitals as per their new profit
sharing ratio.
Prepare necessary Ledger Accounts and Balance Sheet.
[Ans. Profit on Revaluation : ₹3,000; Cash paid to B ₹72,200; Final Capitals A ₹ 1,05,480 and
C ₹70,320; A brings in ₹47,840 and C brings in ₹29,160; B/S Total ₹2,37,300.]
78. Suraj, Pawan and Kamal are partners in a firm sharing profits and losses in the ratio of 3
: 2 : 1. Their Balance Sheet as at 31 st March, 2023 is:

Liabilities ₹ Assets ₹

Creditors 46,000 Cash in Hand 18,000

General Reserve 12,000 Debtors 25,000

Less: Provision for Doubtful

Capital A/cs: Debts 3,000 22,000

Suraj 40,000 Stock 18,000

Pawan 40,000 Furniture 30,000

Kamal 30,000 1,10,000 Machinery 70,000

Goodwill 10,000

1,68,000 1,68,000

Pawan retired on 1st April, 2023 on the following terms:

(a) Provision for Doubtful Debts be raised by ₹ 1,000.
(b) Stock to be reduced by 10% and Furniture by 5%.
(c) There is an outstanding claim of damages of₹ 1,100 and it is to be provided for.
(d) Creditors will be written back by ₹ 6,000.
(e) Goodwill of the firm is valued at ₹ 22,000.
(f) Pawan is paid in full with the cash brought in by Suraj and Kamal in such a manner that
their capitals are in proportion to their profit-sharing ratio and Cash in Hand remains at ₹
10,000.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of Suraj and
Kamal.
[Ans.: Gain (Profit) on Revaluation—₹ 600; For Goodwill: Dr. Suraj's Capital A/c by ₹ 5,500
and
Kamal's Capital A/c by ₹ 1,833; Cr. Pawan's Capital A/c by₹ 7,333; Balances of Capital A/cs
after adjustments: Suraj—₹ 35,800; Pawan—₹ 48,200; Kamal—₹ 28,600; Capitals
Rearranged:
Suraj—₹ 78,450; Kamal—₹ 26,150; Cash brought by Suraj—₹ 42,650;
Cash withdrawn by Kamal—₹ 2,450; Cash Balance—₹ 10,000 (i.e., ₹ 18,000 + ₹ 42,650 - ₹
2,450 - ₹ 48,200);
Balance Sheet Total—₹ 1,45,700.]
79. The Balance Sheet of Asha, Deepa and Lata who were sharing profits in the ratio of 5 :3:2
as at 31st March,
2023 is as follows:

Liabilities ₹ Assets ₹

Creditors 50,000 Cash at Bank 40,000

Employees' Provident
10,000 Sundry Debtors 1,00,000
Fund

Profit & Loss A/c 85,000 Stock 80,000

Capital A/cs: Fixed Assets 60,000

Asha 40,000

Deepa 62,000

Lata 33,000 1,35,000

2,80,000 2,80,000

Asha retired on 1 st April, 2023 and Deepa and Lata decided to share profits in future in the
ratio of 3 : 2 respectively.
The other terms on retirement were:
(a) Goodwill of the firm is to be valued at ₹ 80,000.
(b) Fixed Assets are to be depreciated to ₹ 57,500.
(c) Make a Provision for Doubtful Debts at 5% on Debtors.
(d) A liability for claim, included in Creditors for ₹ 10,000, is settled at ₹ 8,000.
The amount to be paid to Asha by Deepa and Lata in such a way that their Capitals are
proportionate to their profit-sharing ratio and leave a balance of₹ 15,000 in the Bank Account.
Prepare Revaluation Account and Partners’ Capital Accounts.
[Ans.: Loss on Revaluation—₹ 5,500; Payment to Asha—₹ 1,19,750;
Partners' Capital Accounts: Deepa—₹ 1,18,500; Lata—₹ 79,000.]
[Hint: Shortage of Cash/Bank to be brought by Deepa and Lata in order to make payment to
Asha = ₹ 1,02,750.] ,
80. (When Retiring Partner is to be paid through Amount Brought by Remaining Partners in a
manner that their Capitals are Proportionate to New Ratio and also leave desired Cash
Balance). Sushma, Gautam and Kanika were partners in a firm sharing profits in the ratio of 5
: 3 : 2. On 31st March, 2018, their Balance Sheet was as follows:
BALANCE SHEET OF SUSHMA, GAUTAM AND KANIKA as at 31st March, 2018

Liabilities ₹ Assets ₹

Creditors 60,000 Cash at Bank 1,40,000

Employees' Provident Fund 40,000 Sundry Debtors 1,60,000

Profit & Loss Account 1,00,000 Stock 2,40,000

Capital A/cs: Investments 2,00,000

Sushma 3,00,000 Fixed Assets 3,60,000

Gautam 2,50,000

Kanika 3,50,000 9,00,000

11,00,000 11,00,000

On the above date, Sushma retired and it was agreed that:

(i) Fixed Assets will be reduced to ₹ 2,90,000.
(ii) A provision of 5% on debtors for bad and doubtful debts will be created.
(iii) Stock was to be valued at ₹ 2,18,000. Sushma took over the stock at this value.
(iv) Goodwill of the firm on Sushma's retirement was valued at ₹ 8,00,000. Sushma's share of
goodwill was treated by debiting Gautam's and Kanika's Capital Accounts.
(v) Sushma was paid cash brought by Gautam and Kanika in such a way that their capitals
became in profit-sharing ratio and a balance of ₹ 58,000 was left in the bank.
(vi) Gautam and Kanika will share the future profits in the ratio of 2 : 3.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the
reconstituted firm.
Q.80. X Y and Z are partners sharing profits and losses in the ratio of 3 : 2 : 1. Their Balance
Sheet as at 31 st March, 2022 was as follows :

Liabilities ₹ Assets ₹
Sundry Creditors 51,000 Buildings 2,00,000

Employee’s Provident Fund 9,000 Machinery 80,000

Capitals : Sundry Debtors 1,00,000

X 1,52,000 Less : Provision 10,000 90,000

Y 1,48,000 Stock 40,000

Z 84,000 3,84,000 Cash at Bank 22,000

Profit & Loss A/c 12,000

4,44,000 4,44,000

X retired on that date and it was decided to make the following adjustments :
(i) Stock to be depreciated by 40% and sale of old papers and materials realised ₹ 1,000.
(ii) Provision for doubtful debts to be increased to 17% of Sundry Debtors.
(iii) Machinery be depreciated by 40% and buildings be appreciated by 20%.
(iv) Partners paid ₹ 10,000 to the family of an employee who died of an heart-attack.
(v) Goodwill is valued at ₹30,000.
(vi) Y and Z decided to share future profits in the ratio of 3 : 2.
(vii) Y and Z would introduce sufficient capital to pay off X and have thereafter a sum of
₹25,000 as Working Capital in a manner that their Capitals would be in proportion of their new
profit sharing ratio.
Pass journal entries and prepare the Balance Sheet of the new firm.
[Ans. Loss on Revaluation ₹24,000; Cash paid to X ₹ 1,49,000; Final Capitals Y ₹2,16,000; Z
₹ 1,44,000; Y brings in ₹88,000 and Z brings in ₹73,000; B/S Total ₹4,20,000]

Hints : (1) Entry for sale of old papers and materials :

Bank A/c Dr. 1,000

To Revaluation A/c 1,000

(II) Entry for payment of ₹ 10,000 to the family of ex-employee :

Revaluation A/c Dr. 10,000

To Bank A/c 10,000

(III) Gaining Ratio 8 : 7

 DEATH OF A PARTNER.
1. Om, Ram and Shanti were partners sharing profits in the ratio of 1/2, 2/5 and 1/10. Find the
new profit- sharing ratio of the remaining partners if Shanti dies.
[Ans.: New Profit-sharing Ratio—5:4.]
2. From the following particulars, calculate new profit-sharing ratio of the partners:
(a) Shiv, Mohan and Hari were partners in a firm sharing profits in the ratio of 5 :5 :4. Mohan
died and his share was taken equally by Shiv and Hari.
(b) P, Q and R were partners sharing profits in the ratio of 5 :4:1. P died.
[Ans.: New Profit-sharing Ratio—(a) 15:13; (b) 4:1.]
3. A, Band C were partners sharing profits in the ratio of 4:3 :2. A died. 8 and C will share
profits in the ratio of 2 :1. Determine the gaining ratio.
[Ans.: Gaining Ratio—3:1.]
4. (a) W, X, Y and Z are partners sharing profits and losses in the ratio of 1/3,1/6,1/3 and 1/6
respectively.
Y died and W, X and Z decide to share the profits and losses equally in future.
Calculate gaining ratio.
(b) 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 8. Calculate the new profit-sharing ratio and gaining
ratio.
[Ans.: (a) Gaining Ratio of W.X and Z—0:1:1; (b) Gaining Ratio of A and B—4:5;
New Profit-sharing Ratio—44:37.]
5. Keshav, Nirmal and Pankaj are partners sharing profits in the ratio of 5:3:2. Pankaj died and
his share is taken by Keshav. Calculate new profit-sharing ratio of Keshav and Nirmal.
[Ans.: New Profit-sharing Ratio—7:3.]
Deceased Partner's Share of Goodwill
6. X, Y and Z were partners in a firm sharing profit in the ratio of 3:2:1 .The firm closes its
books on 31 st March every year. Y died on 30th June, 2023. On Y's death, goodwill of the
firm was valued at ₹ 60,000. Ys share in the profit of the firm till the date of his death was to
be calculated on the basis of previous year's profit which was ₹ 1,50,000. Pass necessary
Journal entries for goodwill and V"s share of profit at the time of his death.
[Ans.: Gaining Ratio—3:7; Y's Share of Goodwill—₹ 20,000; Y's Share of Profit—₹ 12,500.
Journal Entry for Goodwill: Dr. X's Capital A/c by ₹ 15,000 and
Z's Capital A/c by ₹ 5,000; Cr. Y's Capital A/c by ₹ 20,000.
For Share of Profit: Dr. Profit & Loss Suspense A/c and Cr. Y’s Capital A/c by ₹ 12,500.]
7. 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 April, 2023. The firm's profits for the last four years ended 31st March, were as:
2020—₹ 1,20,000; 2021 —₹ 80,000; 2022—₹ 40,000; 2023—₹ 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.
8. X, Y and Z were partners in a firm sharing profits in the ratio of 4 : 3 : 1. The firm closes its
books on 31st March every year. On 1st February, 2023, Y died and it was decided that the
new profit-sharing ratio between X and Z will be equal. Partnership Deed provided for the
following on the death of a partner:
(a) His share of goodwill be calculated on the basis of half of the profits credited to his account
during the previous four completed years. The firm's profits for the last four years were:

Year 2018-19 2019-20 2020-21 2021-22

Profits (₹) 1,50,000 1,00,000 50,000 1,00,000

(b) His share of profit in the year of his death was to be computed on the basis of average
profit of past two years.
Pass necessary Journal entries relating to goodwill and profit to be transferred to Y's Capital
Account.

Calculation of Profit Share of a Deceased Partner

9. 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. (CBSE2019)
[Ans.: Navita's Share of Profit = ₹ 60,000 × 2/6 = ₹ 20,000.]
10. Anil, Sunil and Hari were partners sharing profits equally. Sunil died on 31st December,
2022. In terms of the partnership deed, accounts were prepared for the period ended 31 st
December, 2022 and net profit was determined at ₹ 6,00,000. Pass the Journal entry for the
profit share of the partners.
[Ans.: Dr. Profit & Loss Appropriation A/c by ₹ 6,00,000; Cr. Anil's Capital A/c by ₹ 2,00,000;
Sunil's Capital A/c by ₹ 2,00,000 and Hari's Capital A/c by ₹ 2,00,000.]
11. A, Band C were partners in a firm sharing profits and losses in the ratio of 2:2 :1. On 25th
February, 2019, B died. B's share of profit till the date of his death was calculated at ₹ 5,000.
Pass the necessary Journal entry for the same in the books of the firm. (CBSE 2020 C)
[Ans.: Dr. Profit and Loss Suspense A/c and Cr. B's Capital A/c by ₹ 5,000.]
12. A, B and C are partners sharing profits and losses in the ratio of 3 :2 :1. B died on 30th
June, 2022. For the year ended 31st March, 2023, proportionate profit of 2022 is to be taken
into consideration. During the year ended 31 st March, 2023, bad debts of ₹ 2,000 had to be
adjusted. Profit for the year ended 31 st March, 2022 was ₹ 14,000 before adjustment of bad
debts. Calculate B's share of profit till the date of his death.
[Ans.: B's Share of Profit—₹ 1,000.]
13. Ram, Manu and Hari were partners in a firm. Hari died on 30th June, 2023. 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, 2021, 2022 and 2023 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.
[Ans.: Hari’s Share of Profit for 3 months—₹ 10,000.]
14. X, Y and Z were partners sharing profits and losses in the ratio of 3 :2:1. Y died on 30th
June, 2022. Profit from 1st April, 2022 to 30th June, 2022 was ₹ 3,60,000. X and Z decided to
share future profits in the ratio of 3 :2 with effect from 1st July, 2022.
Pass the necessary Journal entries to record Y's share of profit up to the date of death.
[Ans.: Dr. X's Capital A/c by ₹ 36,000 and Z's Capital A/c by ₹ 84,000;
Cr. Y's Capital A/c by ₹ 1,20,000; Gaining Ratio of ₹ and Z is 3:7.]
15. Radha, Tina and Reeta were partners sharing profits equally. Reeta died on 31st July,
2022. Radha and Tina decided to continue the business. Share of profit or loss of the
deceased partner from the beginning of the year up to the date of death was to be determined
on the basis of last year's profit, which was ₹ 4,50,000. Pass necessary Journal entry to record
Reeta's share of profit/loss up to the date of death.
[Ans.: Dr. Profit & Loss Suspense A/c and Cr. Reeta's Capital A/c by ₹ 50,000.]
16. Manoj, Rakesh and Harsh were partners sharing profits in the ratio of 2 : 2 :1. Manoj died
on 30th June, 2022. Rakesh and Harsh decided to continue the business. Share of profit or
loss of the deceased partner from the beginning of the year up to the date of death was to be
determined on the basis of last year's profit. Last year's loss was ₹ 2,00,000.
Pass necessary Journal entry to record Manoj's share of profit/loss up to the date of death.
[Ans.: Dr. Manoj's Capital A/c & Cr. Profit & Loss Suspense A/c by ₹ 20,000.]
17. A, Sand C were partners sharing profits in the ratio of 3:2:1. The firm closes its books on
31st March every year. 8 died on 30th June, 2022. On his death, Goodwill of the firm was
valued at X 6,00,000. S's share in profit or loss till the date of death was to be calculated on
the basis of previous year's profit which was ₹ 15,00,000 (Loss). Pass necessary Journal
entries for goodwill and his share of loss.
[Ans.: Share of Goodwill—₹ 2,00,000; S's Share of Loss—₹ 1,25,000.
Journal Entry for Goodwill: Dr. A's Capital A/c by ₹ 1,50,000 and
C's Capital A/c by ₹ 50,000; Cr. B's Capital A/c by ₹ 2,00,000.
For Share of Loss: Dr. B's Capital A/c and
Cr. Profit & Loss Suspense A/c by ₹ 1,25,000.]
[Ans.: Dr. P's Capita/A/c by ₹ 48,000and S's Capita/A/c by ₹ 12,000; Cr. P's Capita/A/c by ₹
60,000.]
Q.18 Hari, Mohan and Sohan were partners in a firm sharing profits in 2 : 2 : 1 ratio. The firm
closes its books on 31st March every year. Mohan died on 24-8-2021. On Mohan’s death the
goodwill of the firm was valued at ₹75,000. The partnership deed provided that on the death
of a partner his share in the profits of the firm in the year of his death will be calculated on the
basis of last year’s profit. The profit of the firm for the year ended 31-3-2021 was ₹2,00,000.
Calculate Mohan’s share of profit till the time of his death and pass the necessary journal
entries for the treatment of goodwill and his share of profit.
[Ans. Mohan’s share of goodwill ₹30,000; Mohan’s share of profit ₹32,000.]
Hint: Number of Days up to the date of death = 146.
Q.19. A, B and C are sharing profits in the ratio of 4 : 3 : 2. A dies on 31st December, 2022.
Accounts are closed on 31st March every year. Sales for the year ending 31st March, 2022
amounted to ₹4,00,000. Sales of ₹3,30,000 amounted between the period from 1st April 2022
to 31st December 2022. The profit for the year ending 31st March, 2022 amounted to ₹60,000.
Calculate the deceased partner’s share in the current year’s profits of the firm.
[Ans. ₹22,000]
IMP** 20. X, Y and Z were partners in a firm. Z died on 31st May, 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 years of profits before death. Profits for the years
ended 31st March, 2020, 2021 and 2022 were ₹ 18,000; ₹ 19,000 and ₹ 17,000 respectively.
Calculate Z's share of profit till his death and pass necessary Journal entry for the same when:
(a) profit-sharing ratio of remaining partners does not change, and
(b) profit-sharing ratio of remaining partners changes and new ratio being 3 :2.
[Ans.: (i) Dr. Profit & Loss Suspense A/c and Cr. Z's Capital A/c by ₹ 1,000.
(ii) Dr. Profit & Loss Suspense A/c by ₹ 1,000; Cr. Z's Capital A/c by ₹ 1,000;
Dr. X's Capital A/c by ₹ 800 and Y's Capital A/c by ₹ 200; Cr. Profit & Loss Suspense A/c by
₹1,000;
Alternatively: Dr. X's Capital A/c by ₹ 800 and Y's Capital A/c by ₹ 200; Cr. Z's Capital A/c by
₹ 1,000.]
IMP ** Q.21 A, B and C were partners in a firm. B died on 31st August, 2021. B's 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
ending 31st March 2019, 2020 and 2021 were ₹40,000; ₹50,000 and ₹72,000 respectively.
The firm closes its books on 31st March every year.
Calculate B's share of profit till the date of her death and pass the necessary journal entry for
the same assuming :
(i) There is no change in the profit sharing ratio of A and C
(ii) There is change in the profit sharing ratio of A and C and the new ratio is 7 : 5.
[Ans.

Case (i) P & L Suspense A/c Dr. 7,500

To B's Capital A/c 7,500

Case (ii) A’s Capital A/c Dr. 5,625

C’s Capital A/c Dr. 1,875

To B’s Capital A/c 7,500]

22 A, B and C were partners sharing profits and losses in the ratio of 2:2:1. C died on 30th
June, 2023. Profit and Sales for the year ended 31 st March, 2023 were ₹ 1,00,000 and ₹
10,00,000 respectively. Sales during April to June, 2023 were ₹ 1,50,000. You are required to
calculate share of profit of C till the date of his death.
[Ans.: % of Profit to Sales— 10%, Profit for the period April to June,
2023—₹ 15,000; C's Share of Profit—₹ 3,000.]

23. Ajay, Bhawna and Shreya were partners sharing profits in the ratio of 2:2:1. On 1st July,
2022 Shreya died. The books of accounts are closed on 31st March every year. Sales for the
year 2021-22 ₹ 5,00,000 and that from 1st April to 30th June, 2022 were ₹ 1,40,000. Rate of
profit during the past three years had been 10% on sales. Since Shreya's legal representative
was her only son, who is differently abled, it was decided that the profit for the purpose of
settling Shreya's account is to be calculated as 20% on sales.
Calculate Shreya's share of profits till the date of her death and pass necessary Journal entry
for the same. (CBSE 2018 C, Modified)
[Ans.: Profit on sale from 1st April, 2022 to 30th June, 2022 = ₹ 1,40,000 × 20/100 = ₹
28,000
Shreya's Share of Profit till the date other death = ₹ 28,000 × 1/5 = ₹ 5,600.
Journal Entry: Dr. Profit & Loss Suspense A/c and Cr. Shreya's Capital A/c by ₹ 5,600.]
24. Raman, Param and Karan were partners sharing profits and losses in the ratio of 3 : 2 :1.
Param died on 31 st December, 2022. Accounts of the firm are closed on 31 st March every
year. Sales for the year ended 31 st March, 2022 was ₹ 12,00,000 and sales for the nine
months ended 31 st December, 2022 was ₹ 6,00,000. Loss for the year ended 31st March,
2022 was ₹ 90,000. Calculate deceased partner's share of profit/loss from the beginning of
the accounting year up to 31st December, 2022.
[Ans.: Param's Share of Loss—₹ 15,000.]
25 Akhil, Bikram and Charu were partners sharing profits and losses in the ratio of 3 : 2 :1.
Bikram died on 30th September, 2022. Loss from the beginning of the accounting year till the
date of death was estimated at ₹ 3,60,000. Akhil and Charu decided to share future profits in
the ratio of 3 : 2 w.e.f. 1 st October, 2022.
Pass the necessary Journal entry to record Bhuwan's share of profit/loss up to the date of
death.
[Ans.: (i) Dr. Bikram's Capital A/c and Cr. Profit & Loss Suspense A/c by ₹ 1,20,000.
(ii) Dr. Profit & Loss Suspense A/c by ₹ 1,20,000;
Cr. Akhil's Capital A/c by ₹ 36,000 and Charu's Capital A/c by ₹ 84,000.
Alternatively: Dr. Bikram's Capital A/c by ₹ 1,20,000;
Cr. Akhil's Capital A/c by ₹ 36,000 and Charu's Capital A/c by ₹ 84,000.]
26. Abha, Beena and Chanda were partners in a firm sharing profits and losses in the ratio of
5 : 3 : 2. Abha died on 1st July, 2023. The Partnership Deed provided that Abha's executors
are entitled to her share of profit till the date of death calculated on the basis of sales for the
immediate previous year. Sales for the year ended 31st March, 2023 was₹ 12,00,000 and the
profit for the same year was ₹ 3,00,000. Sales shows a growth trend of 20% and percentage
of profit earning remains the same.
Journalize the transaction along with working notes.
[Ans.: Dr. Profit & Loss Suspense A/c and Cr. Abha's Capital A/c by ₹ 45,000.]

Determination of Amount Payable to Executors of a Deceased Partner

27. 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.
[Ans.: Balance due to Kamal—₹ 38,200.]
28 Karim, Saleem and Raheem were partners in a firm sharing profits and losses in the ratio
of 3 :4 ; 3. The firm closes its books on 31st March every year. On 1st October, 2019, Karim
died. On Karim's death, the goodwill of the firm was valued at ₹ 3,50,000. Karim's share in the
profits of the firm in the year of his death was to be calculated on the basis of average profits
of last four years. The profits for the last four years were 2015-16—₹ 1,70,000; 2016-17—₹
1,30,000; 2017-18—₹ 1,90,000 and 2018-19—₹ 1,10,000. The total amount payable to
Karim's executors on his death was ₹ 7,35,000. It was paid on 15th October, 2019.
Pass necessary Journal entries for the above transactions in the books of the firm.
(CBSE2020)
[Ans.: Karim's share of Goodwill = ₹ 1,05,000; Karim's share of profit = ₹ 22,500;
Amount transferred to Karim's Executors = ₹ 7,35,000.]
Q. 29. A, B and C were partners in a firm sharing profits and losses in the ratio of 2:2: 1. Their
books are closed on March 31 st every year.
B died on 1 st August, 2022. The executors of B are entitled to :
(i) His share of Capital i.e., ₹4,00,000 along-with his share of goodwill. The total goodwill of
the firm was valued at 1.5 year’s purchase of last year’s profit.
(ii) His share of profit up to his date of death on the basis of sales till date of death. Sales for
the year ended March 31, 2022 was ₹4,00,000 and profit for the same year was ₹ 80,000.
Sales shows a growth trend of 25% and percentage of profit earning is increased by 4%.
(iii) Amount payable to B was transferred to his executors.
Pass necessary Journal Entries and show the workings clearly.
[Ans. Amount payable to R’s Executors ₹4,64,000]
Hints : B’s share of Goodwill ₹48,000; B’s share of profit ₹16,000.
Q. 30 Ram, Ghanshyam and Vrinda were partners in a firm sharing profits in the ratio of 4 : 3
: 1. The firm closes its books on 31 st March every year. On 1 st February, 2023 Ghanshyam
died and it was decided that the new profit-sharing ratio between Ram and Vrinda will be
equal. The Partnership Deed provided for the following on the death of a partner :
(a) His share of goodwill be calculated on the basis of half of the profits credited to his account
during the previous four completed years :
The firm’s profit for the last four years were.
2018-19 — ₹ 1,20,000, 2019-20 — ₹80,000, 2020-21 — ₹40,000, and 2021-22 — ₹80,000.
(b) His share of profit in the year of his death was to be computed on the basis of average
profits of past two years.
Pass necessary Journal entries relating to goodwill and profit to be transferred to
Ghanshyam’s Capital Account. Also show your workings clearly.
[Ans. Ghanshyam’s share of Goodwill ₹60,000, which will be debited entirely to Vrinda’s
Capital A/c; Ghanshyam’s share of profit till the date of death ₹ 18,750 will also be debited
entirely to Vrinda’s Capital A/c.]
Hint : Ghanshyam’s share of profit will not be adjusted through Profit & Loss Suspense A/c
because of change in profit sharing ratios of continuing partners.
Q. 31 Arun, Bhim and Nakul are partners in a firm sharing profits in the ratio of 1 :1 : 3. Their
Capital Accounts showed the following balances on 1st April, 2020:
Arun—₹ 2,00,000; Bhim—₹ 1,50,000 and Nakul—₹ 4,50,000.
Firm closes its accounts every year on 31st March. Bhim died on 31st March, 2021. In the
event of death of
any partner, the Partnership Deed provides for the following:
(i) Interest on capital will be allowed to deceased partner only from the first of day of the
accounting year till the date of his death @ 10% p.a.
(ii) The deceased partner's share in the Goodwill of the firm will be calculated on the basis of
2 years' purchase of the average profit of the last three years. The profits of the firm for the
last three years ended 31st March, were: 2019—₹ 90,000; 2020—₹ 2,00,000 and 2021—₹
1,60,000.
(iii) His share of Profits till the Date of Death: The profit of the firm for the year ended 31 st
March, 2021 was ₹ 1,60,000 before providing for interest on capital. Bhim's Executor was paid
the sum due in two equal annual instalments with interest @ 10% p.a.
Prepare Bhim's Capital Account as on 31st March, 2021 to be presented to his executor and
his Executor's
Loan Account for the year ending 31st March, 2022 and 31st March, 2023.
[Ans.: Bhim's Share of Goodwill—₹ 60,000; Bhim's Share of Profit—₹ 29,000; Balance of
Bhim's Capital Account transferred to Bhim's Executor's Account—₹ 2,54,000.]
Note: Only deceased partner Bhim is entitled to interest on capital. So, no interest on capital
will be allowed to Arun and Nakul.
32. Furkan, Tanmay and Barkat were partners in a firm sharing profits in the ratio of 3 : 2 : 1.
The firm closes its books on 31st March every year. Tanmay died on 31st July, 2019. His
executor was entitled to :
(i) His capital ₹8,00,000 and his share of goodwill which was valued for the firm at ₹96,Q00.
(ii) His share of profit as per partnership agreement, which was to be calculated on the basis
of average profit of last 3 years. Average profits of the last 3 years were ₹ 78,000.
(iii) Tanmay’s executor’s were paid ₹95,000 by cheque at the time of his death and the balance
was transferred to his executor’s loan account.
Pass the necessary journal entries in the books of the firm, on Tanmay’s death, for the above
transactions. (C.B.S.E. 2020, Mumbai, Chennai)
[Ans. Amount transferred to Tanmay’s Executor’s Loan A/c ₹7,45,667.]

Hint: (i) Tanmay’s Capital A/c Dr. 8,40,667

To Tanmay’s Executor’s A/c 8,40,667

(ii) Tanmay’s Executor’s A/c Dr. 8,40,667

To Bank A/c 95,000

 To Tanmay’s Executor’s Loan A/c 7,45,667

33 A, B and C were partners in a firm. A died on 31st March, 2018 and the Balance Sheet of
the firm on that date was as under:
BALANCE SHEET OF A, B AND C as at 31st March, 2018

Liabilities ₹ Assets ₹

Creditors 7,000 Cash at Bank 12,000

General Reserve 9,000 Debtors 32,000

Workmen's Compensation
10,000 Furniture 30,000
Fund

Profit & Loss Account 6,000 Plant 40,000

Capitals: Patents 8,000

A 40,000

B 30,000

C 20,000 90,000

1,22,000 1,22,000

On A's death it was found that patents were valueless, furniture was to be brought down to ₹
24,000, plant was to be reduced by ₹ 10,000 and there was a liability of ₹ 7,000 on account
of workmen's compensation. Pass the necessary Journal entries for the above at the time of
A's death. (CBSE 2019)
[Ans.: Loss on Revaluation—₹ 24,000. A's Executor's Account—₹ 38,000.]
34. Shirish, Harit and Asha were partners in a firm sharing profits in the ratio of 5 : 4 : 1. Shirish
died on 30th June, 2018. On this date, their Balance Sheet was follows:
BALANCE SHEET OF SHIRISH, HARIT AND ASHA as at 31st March, 2018

Liabilities ₹ Assets ₹

Capitals: Plant and Machinery 5,60,000

Shirish 1,00,000 Stock 90,000

Harit 2,00,000 Debtors 10,000

Asha 3,00,000 6,00,000 Cash 40,000

Profits for the year 2017-18 80,000

Bills Payable

7,00,000
According to the Partnership Deed, in addition to deceased partner's capital, his executor is
entitled to:
(i) Share in profits in the year of death on the basis of average of last two years' profit. Profit
for the year 2016-17 was ₹ 60,000.
(ii) Goodwill of the firm was to be valued at 2 years' purchase of average of last two years'
profits.
Prepare Shirish's Capital Account to be presented to his executor. (CBSE2019)
[Ans.: Amount due to Shirish’s Executors—₹ 2,18,750.]
35. On 31st March, 2014, the Balance Sheet of Pooja, Qureshi and Ross, who were partners
in a firm was as under:

Liabilities ₹ Assets ₹

Sundry Creditors 2,50,000 Building 2,60,000

Reserve Fund 2,00,000 Investment 1,10,000

Capital A/cs: Qureshi's Loan 1,00,000

Pooja 1,50,000 Debtors 1,50,000

Qureshi 1,00,000 Stock 1,20,000

Ross 1,00,000 3,50,000 Cash 60,000

8,00,000 8,00,000

Qureshi died on 1st July, 2014. The profit-sharing ratio of the partners was 2:1:1. On the death
of a partner, the Partnership Deed provided for the following:
(i) His share in the profits of the firm till the date of his death will be calculated on the basis of
average profits of last three completed years.
(ii) Goodwill of the firm will be calculated on the basis of total profit of last two years.
(iii) Interest on loan given by the firm to a partner will be charged at the rate of 6% p.a. or ₹
4,000, whichever is more.
(iv) Profits for the last three years were ₹ 45,000; 7 48,000 and ₹ 33,000.
Prepare Qureshi's Capital Account to be rendered to his executors. (Delhi2015 C)
[Ans.: Amount due to Qureshi's Executors—₹ 68,875.]
36. The Balance Sheet of A, B and C who were sharing profits in the ratio of 3 :3 :4 as at 31st
March, 2019 was as follows:
BALANCE SHEET OF A, B AND C as at 31st March, 2019

Liabilities ₹ Assets ₹

General Reserve 40,000 Cash 4,000

Bills Payable 15,000 Stock 43,000

Loan from Bank 30,000 Investments 70,000

Capitals: Land and Buildings 1,58,000

A 60,000

B 90,000

C 40,000 1,90,000

2,75,000 2,75,000

A died on 1st October, 2019. The partnership deed provided for the following on the death of
a partner:
(a) Goodwill of the firm be valued at two years' purchase of average profits for the last three
years.
(b) The profit for the year ending 31st March, 2019 was ₹ 50,000.
(c) Interest on capital was to be provided @ 6% p.a.
(d) The average profits of the last three years were ₹ 35,000.
Prepare A's Capital Account to be rendered to his executors. (CBSE 2020 C)
[Ans.: Transferred to A's Executor's Account—₹ 1,02,300.]

37 X, Y and Z were partners in a firm sharing profits in the ratio of 2 :2:1. On 31st March, 2022,
their Balance Sheet was as follows:

Liabilities ₹ Assets ₹

Trade Creditors 1,20,000 Cash at Bank 1,80,000

Bills Payable 80,000 Stock 1,40,000

General Reserve 60,000 Sundry Debtors 80,000

Capital A/cs: Building 3,00,000

X 7,00,000 Advance to Y 7,00,000

Y 7,00,000 Profit & Loss A/c 3,20,000

Z 60,000 14,60,000

17,20,000 17,20,000

Y died on 30th June, 2022. Partnership Deed provided for the following on the death of a
partner:
(i) 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, 2022, 31st March, 2021, 31st March,
2020, 31st March, 2019 and 31st March, 2018 were ₹ 3,20,000 (Loss); ₹ 1,00,000; ₹ 1,60,000;
₹ 2,20,000 and ₹ 4,40,000 respectively.
(ii) Y's share of profit or loss from 1 st April, 2022 till his death was to be calculated on the
basis of the profit or loss for the year ended 31st March, 2022.
You are required to calculate the following:
(a) Goodwill of the firm and Y's share of goodwill at the time of his death.
(b) Y's share in the profit or loss of the firm till the date of his death.
(c) Prepare Y's Capital Account at the time of his death to be presented to his executors.
[Ans.: Amount due from Y's Executors—₹ 40,000; Y's Share of Goodwill—₹ 96,000.]
38 The Balance Sheet of Sadhu, Raja and Karan who were sharing profits in the ratio of 4:2:4
as at 31 st March, 2023 was as follows:
BALANCE SHEET as at 31st March, 2023

Liabilities ₹ Assets ₹

Bill Payable 20,000 Cash 26,000

Loan 22,000 Stock 64,000

General Reserve 10,000 Investments 85,000

Capital A/cs: Land and Building 97,000

Sadhu 80,000 Sadhu's Loan 20,000

Raja 60,000

Karan 1,00,000 2,40,000

2,92,000 2,92,000

Sadhu died on 31st July, 2023. The Partnership Deed provided for the following on the death
of a partner:
(i) Goodwill of the firm be valued at two years' purchase of average profits for the last three
years.
(ii) Sadhu's share of profit or loss till the date of his death was to be calculated on the basis of
sales. Sales for the year ended 31st March, 2023 amounted to ₹ 4,50,000 and that from 1st
April to 31st July, 2023 ₹ 2,70,000. The profit for the year ended 31st March, 2023 was
calculated as ₹ 1,25,000.
(iii) Interest on capital was to be provided @ 5% p.a.
(iv) The average profits of the last three years were ₹ 55,000.
Prepare Sadhu's Capital Account to be rendered to his executor. (Delhi 2013, Modified)
[Ans.: Amount due to Sadhu's Executors—₹ 1,39,333.]

39. Q. 67. The Balance Sheet of Sindhu, Rahul and Kamlesh, who were sharing profits in the
ratio of 3 : 3 : 4 respectively, as at 31st March, 2020 was as follows :

Liabilities ₹ Assets ₹

General Reserve 10,000 Cash 32,000

Bills Payable 20,000 Stock . 88,000

Loan 24,000 Investments 94,000

Capitals : Sindhu : 1,20,000 Land & Building 1,20,000

Rahul : 1,00,000 Sindhu’s loan 20,000

Kamlesh : 80,000 3,00,000

3,54,000 3,54,000

Sindhu died on 31 st July 2020. The partnership deed provided for the following on the death
of a partner :
(a) Goodwill of the firm be valued at two year’s purchase of average profits for the last three
years which were ₹ 80,000.
(b) Sindhu’s share of profit till the date of his death was to be calculated on the basis of sales.
Sales for the year ended 31st March, 2020 amounted to ₹8,00,000 and that from 1st April to
31st July 2020 ₹3,00,000. The profit for the year ended 31st March, 2020 was ₹2,00,000.
(c) Interest on capital was to be provided @ 6% p.a.
Prepare Sindhu’s Capital Account to be rendered to his executor.
[Ans. Balance due to Sindhu’s Executor ₹ 1,75,900.]
Q. 40 A, B and C were partners in a firm sharing profits in the ratio of 5 : 3 : 2. The Balance
Sheet as at 31-3-2020 was as follows :

Liabilities ₹ Assets ₹

Creditors 12,000 Building 20,000

Reserves 6,000 Plant and Machinery 16,000

A’s Capital 24,000 Stock 5,100

B’s Capital 12,000 Debtors 6,000

C’s Capital 8,000 Cash at Bank 6,900

Advertisement Suspense 8,000

62,000 62,000

A died on 30-9-2020 and B and C decided to share future profits in the ratio of 7 : 3. Under
the partnership agreement the executors of a deceased partner were entitled to :
(a) Amount standing to the credit of partner’s capital account.
(b) Interest on capital at 12% per annum.
(c) Share of goodwill on the basis of four years purchase of last three years average profit.
(d) Share of profit from the closing of the last financial year to the date of death on the basis
of last year's profit. Profits for the year 2018,2019 and 2020 were ₹8,000; ₹ 12,000 and ₹7,000
respectively.
Prepare A’s Capital account to be rendered to his executors.
[Ans. Amount due to A’s Executor’s ₹44,190.]
Hint: A’s share of goodwill ₹ 18,000 and share of profit ₹ 1,750 will be credited to A and debited
to B and C in their gaining ratio of 4 : 1. A’s share of profit should not be debited to Profit &
Loss Suspense A/c because profit sharing ratio between B and C does not remain the same.
Their profit sharing ratio has changed from 3 : 2 to 7 : 3.
Q. 41 Ram, Ghanshyam and Vrinda were partners in a firm sharing profits in the ratio of 4 : 3
: 1. The firm closes its books on 31 st March every year. On 1 st February, 2023 Ghanshyam
died and it was decided that the new profit-sharing ratio between Ram and Vrinda will be
equal. The Partnership Deed provided for the following on the death of a partner :
(a) His share of goodwill be calculated on the basis of half of the profits credited to his account
during the previous four completed years :
The firm’s profit for the last four years were.
2018-19 — ₹ 1,20,000, 2019-20 — ₹80,000, 2020-21 — ₹40,000, and 2021-22 — ₹80,000.
(b) His share of profit in the year of his death was to be computed on the basis of average
profits of past two years.
Pass necessary Journal entries relating to goodwill and profit to be transferred to
Ghanshyam’s Capital Account. Also show your workings clearly.
[Ans. Ghanshyam’s share of Goodwill ₹60,000, which will be debited entirely to Vrinda’s
Capital A/c; Ghanshyam’s share of profit till the date of death ₹ 18,750 will also be debited
entirely to Vrinda’s Capital A/c.]
Hint : Ghanshyam’s share of profit will not be adjusted through Profit & Loss Suspense A/c
because of change in profit sharing ratios of continuing partners.
Q. 42. A, B and C were partners in a firm. A died on 31.3.2018 and the Balance Sheet of the
firm on that date was as under :
BALANCE SHEET OF A, B AND C
as at 31.3.2018

Liabilities ₹ Assets ₹

Creditors 7,000 Cash at Bank 12,000

General Reserve 9,000 Debtors 32,000

Workmen’s Compensation Furniture 30,000

Reserve 10,000 Plant 40,000

Profit & Loss Account Patents

6,000 8,000
Capitals :

A 40,000

B 30,000

C 20,000 90,000

1,22,000 1,22,000

On A’s death it was found that patents were valueless, furniture was to be brought down to
₹24,000, plant was to be reduced by ₹ 10,000 and there was a liability of ₹7,000 on account
of workmen’s compensation.
Pass the necessary journal entries for the above at the time of A’s death.
(C.B.S.E. 2019. Delhi)
[Ans. Amount due to A’s Executors ₹38,000.]
Q.43 Tripti, Atishay and Radhika were partners in a firm sharing profits and losses in the ratio
of 2 : 2 : 1. Their Balance Sheet as at 31-3-2019 was as follows :
BALANCE SHEET OF TRIPTI, ATISHAY AND RADHIKA
as at 31st March. 2019

Liabilities ₹ Assets ₹

Capitals : Plant and Machinery 5,00,000

Tripti 3,00,000 Stock 3,10,000

Atishay 2,00,000 Sundry Debtors 60,000

Radhika 1,00,000 6,00,000 Cash at Bank 40,000

Profit for the Year 2018-19 2,00,000

General Reserve 50,000

Creditors 60,000

9,10,000 9,10,000

Tripti died on 30th June, 2019. According to the partnership deed, the executors of the
deceased partner are entitled to :
(a) Balance in partner’s capital account.
(b) Salary @₹ 12,500 per quarter.
(c) Share of goodwill calculated on the basis of twice the average of past three years’ profits
and share of profits from the closure of the last accounting year till the date of death on the
basis of last year’s profit. Profits for 2016-17 and 2017-18 were ₹ 1,00,000 and ₹ 1,50,000
respectively.
(d) Tripti withdrew ₹20,000 on 1st May, 2019 for her personal use.
Prepare Tripti’s Capital Account to be rendered to her executors.
(C.B.S.E. 2020, Delhi Modified)
[Ans. Amount due to Tripti’s Executors ₹5,32,500.]
Hint: Average Profit = 1/3 (1,00,000 + 1,50,000 + 2,00,000 given in Balance Sheet).
Q. 44. A, B and C are partners in a firm sharing profits in the ratio of 5 : 3 : 2 respectively.
Their Balance Sheet as at 31st March, 2023 was as follows :
BALANCE SHEET
as at 31st March, 2023

Liabilities ₹ Assets ₹

Creditors 12,000 Cash 13,000

Reserves 4,000 Debtors 8,000

Workmen Compensation Reserve 6,000 Stock 10,000

Capitals : Machinery 30,000

A 30,000 Buildings 20,000

B 20,000 Patents 6,000

C 15,000

87,000 87,000

On 1st October, 2023, due to illness B died. As per the agreement:

(i) Goodwill is to be valued at two years’ purchase of the average profits of previous five years,
which were : 2019 — ₹10,000; 2020 — ₹13,000; 2021 — ₹ 12,000; 2022 — ₹15,000 and 2023
— ₹20,000.
(ii) Patents were valued at ₹8,000; Machinery at ₹28,000 and Buildings at ₹30,000.
(iii) B’s share of profit till the date of his death will be calculated on the basis of profit of the
year 2023.
(iv) Interest on capital will be provided at 10% p.a.
(v) Amount due to B’s executors will be transferred to Charity account.
Prepare B’s capital account to be presented to his executors.
[Ans. Amount due to B’s Executors ₹38,400.]
Q. 45 A, B and C are in partnership, sharing profits in the proportion of two-thirds, one-sixth
and one-sixth respectively.
A died on the 30th June, 2022, three months after the annual accounts had been prepared
and in accordance with the partnership agreement, his share of the profits to the date of death
was estimated on the basis of the profit for the preceding year. In addition to this, the
agreement provided for interest on capital at 5 per cent per annum on the balance standing to
the credit of the capital account at the date of the last Balance Sheet, and also for goodwill,
which was to be brought into account at two year’s purchase of the average profits for the last
three years.
A’s capital on 31st March, 2022 stood at ₹ 1,20,000, and his drawings from then to the date
of death amounted to ₹9,000.
The net profits of the business for the three preceding years amounted to ₹33,500; ₹41,500
and ₹40,500, respectively.
You are required to prepare A’s Capital Account as at the date of death, for a settlement with
his executors.
[Ans. Amount payable to A’s executors ₹1,70,583].
Q. 46. You are given the Balance Sheet of A, B and C who are partners sharing profits in the
ratio of 2 : 2 : 1 as at March 31, 2022.

Liabilities ₹ Assets ₹

Creditors 40,000 Goodwill 30,000

Reserve Fund 25,000 Fixed Assets 60,000

Capitals : Stock 10,000

A 30,000 Sundry Debtors 20,000

B 25,000 Cash at Bank 15,000

C 15,000 70,000

1,35,000 1,35,000

B died on June 15, 2022. According to the Deed, his legal representatives are entitled to :
(a) Balance in Capital Account;
(b) Share of goodwill valued on the basis of thrice the average of the past 4 year’s profits;
(c) Share in profits up to the date of death on the basis of average profits for the past 4 years;
(d) Interest on capital account @ 12% p.a.
Profits for the years ending on March 31 of 2019, 2020, 2021, 2022 respectively were ₹15,000,
₹ 17,000, ₹19,000 and ₹13,000.
B’s legal representatives were to be paid the amount due. A and C continued as partners by
taking over B’s share equally. Work out the amount payable to B’s legal representatives.
[Ans. Amount paid to B’s representatives ₹44,158.]
Hints : (1) Share in profits for 2.5 months ₹ 1,333.
(2) B’s share of profit ₹ 1,333 will be credited to B and debited to A and C in their gaining ratio
i.e. equally.
Q. 47 P, Q and R were partners in a firm sharing profits in the ratio of 5 : 6 : 9. On 31-3-2023,
their Balance Sheet was as follows :

Liabilities ₹ Assets ₹

Creditors 30,000 Cash 10,000

Bills Payable 40,000 Bank 80,000

General Reserve 60,000 Stock 40,000

Capitals : Debtors 70,000

P 1,30,000 Building 2,00,000

Q 2,00,000 Land 3,00,000

R 4,00,000 7,30,000 Profit and Loss A/c 1,60,000

8,60,000 8,60,000

R died on 30th April, 2023. The partnership deed provided for the following on the death of a
partner :
(i)Goodwill of the firm was to be valued at 3 year’s purchase of the average profits of the last
5 years. The profits for the years ending 31-3-2022, 31-3-2021,31-3-2020 and 31-3-2019 were
₹80,000; ₹80,000; ₹1,10,000 and ₹2,20,000 respectively.
(ii) R's share of profit or loss till the date of his death was to be calculated on the basis of the
profit or loss for the year ending 31-3-2023.
You are required to calculate the following :
(i) Goodwill of the firm and R's share of goodwill at the time of his death.
(ii) R's share in the profit or loss of the firm till the date of his death.
Prepare R's Capital Account also at the time of his death to be presented to his executors.
[Ans. R's share of goodwill ₹89,100; R's share in loss (for one month) ₹6,000; Amount due to
R's Executors ₹4,38,100.]
Q. 48. Dev, Swati and Sanskar were partners in a firm sharing profits in the ratio of 2 : 2 : 1.
On 31-3-2023 their Balance Sheet was as follows :

Liabilities ₹ Assets ₹

Trade Payables 17,000 Building 1,04,000

Bank Loan 13,000 Inventory 16,000

Capitals : Trade Receivables 23,000

Dev 77,000 Cash 40,000

Swati 87,000 Profit & Loss Ac 57,000

Sanskar 46,000 2,10,000

2,40,000 2,40,000

On 30th June, 2023 Dev died. According to partnership agreement Dev was entitled to interest
on capital at 12% per annum. His share of profit till the date of his death was to be calculated
on the basis of the average profits of last four years. The profits of the last four years were :

Years Profit

2019-20 2,04,000

2020-21 1,80,000

2021-22 90,000

2022-23 (Loss) 57,000

On 1-4-2023, Dev withdrew ₹ 15,000 to pay for his medical bills.

Prepare Dev’s account to be presented to his executors.
[Ans. Balance due to Dev’s Executors ₹51,935.]
Hint : Since drawing is not made out of capital, interest on capital will be allowed on ₹77,000.
Q. 49 Vikas, Gagan and Momita were partners in a firm sharing profits in the ratio of 2 : 2 : 1.
The firm closes its books on 31st March every year. On 30th September, 2020 Momita died.
According to the provisions of partnership deed the legal representatives of a deceased
partner are entitled for the following in the event of his/her death :
(i) Capital as per the last Balance Sheet.
(ii) Interest on capital at 6% p.a. till the date of her death.
(ii) Her share of profit to the date of death calculated on the basis of average profits of last four
years.
(iv) Her share of goodwill to be determined on the basis of three years purchase of the average
profits of last four years. The profits of last four years were :

Years Profit

2016-17 30,000

2017- 18 50,000

2018- 19 40,000

2019- 20 60,000

The balance in Momita’s capital account on 31-3-2020 was ₹60,000 and she had withdrawn
₹ 10,000 till the date of her death. Interest on her drawings were ₹300.
Prepare Momita’s Capital Account to be presented to her executors.
[Ans. Balance due to Momita’s Executors ₹83,000.]
Hint Interest on Capital ₹ 1,800.
Q. 50 Babita, Chetan and David are partners in a firm sharing profits in the ratio of 2 : 1 : 1
respectively. Firm closes its accounts on 31st March every year. Chetan died on 30th
September, 2020. There was a balance of ₹ 1,25,000 in Chetan’s Capital Account in the
beginning of the year. In the event of death of any partner, the partnership deed provides for
the following :
(i) Interest on capital will be calculated at the rate of 6% p.a.
(ii) The executor of deceased partner shall be paid ₹24,000 for his share of goodwill.
(iii) His share of Reserve Fund which is ₹ 12,000; shall be paid to his executor.
(iv) His share of profit till the date of death will be calculated on the basis of sales. It is also
specified that the sales during the year 2019-20 were ₹4,00,000. The sales from 1st April,
2020 to 30th September, 2020 were ₹ 1,20,000, the profit of the firm for the year ending 31st
March, 2020 was ₹2,00,000.
Prepare Chetan’s Capital Account to be presented to his executors.
[An; Amount due to Chetan’s Executors ₹ 1,79,750.]
Q. 51. Aman, Raman and Suman were partners sharing profits the ratio of 3:2:1 respectively.
The profit and sales for the year ended 31 March, 2021 were ₹3 lakh and f 10 lakh respectively.
Aman died on 30th November, 2021. Calculate the share of deceased partner in the profits
for the period from 1st April, 2021 to 30th November, 2021, if the same is calculated :
(i) On the basis of sales which were ₹8 lakh from 1st April, 2021 to 30th November, 2021.
(ii) On the basis of Time.
Also pass the necessary journal entry for the share.
[Ans. Aman’s share of profit:
On the basis of Sales ₹ 1,20,000;
On the basis of Time ₹ 1,00,000.]
Q. 52. Ram, Mohan and Sohan were partners sharing profits and losses in the ratio of 5 : 3 :
2. On 31st March, 2021 their Balance Sheet was as under :

Liabilities ₹ Assets ₹

Capitals: Leasehold 1,25,000

Ram 1,50,000 Patents 30,000

Mohan 1,25,000 Machinery 1,50,000

Sohan 75,000 3,50,000 Stock 1,90,000

Creditors 1,55,000 Cash at Bank 40,000

Workmen’s Compensation

Reserve 30,000

5,35,000 5,35,000

Sohan died on 1 st August, 2021. It was agreed that:

(i) Goodwill of the firm is to be valued at ₹ 1,75,000.
(ii) Machinery be valued at ₹ 1,40,000; Patents at ₹40,000; Leasehold at ₹ 1,50,000 on this
date.
(iii) For the purpose of calculating Sohan’s share in the profits of 2021-22, the profits should
be taken to have accrued on the same scale as in 2020-21, which were ₹75,000.
Prepare Sohan’s Capital Account and Revaluation Account.
[Ans. Amount due to Sohan’s Executors ₹ 1,26,000.]
Hint: Since there is no claim against Workmen’s Compensation Reserve Sohan’s share in this
reserve will be credited to his account.
Q. 53 In the partnership agreement between X, Y and Z who were sharing profits in the ratio
of 5 : 3 : 2, the goodwill was to be valued on the death of any partner on the basis of such
partner’s share of 2 year’s profits calculated on the average of 5 year’s profits immediately
preceding the year of death less 10%. The firm’s profits were 2016 ₹10,000; 2017 ₹30,000;
2018 ₹43,000 and in 2019 and 2020 losses of ₹6,000 and ₹4,000 respectively. The deceased
partner’s share of profits for the period of his life-time in the year of death was to be based on
the average of the profits of the previous 3 years plus 10%.
X died on 31st August, 2020. His Capital A/c showed a credit of ₹50,000 on 1st April, 2020
and he had drawn ₹ 4,000 since that date.
Calculate the amount due to his legal representatives.
[Ans. Amount payable IGA’S legal representatives ₹61,661]
Hint: X’s share of Goodwill ₹ 13,140; Share of Profit ₹2,521.
Q. 54 A, B and C were partners. Their partnership deed provided that they were to share
profits thus; A 26 per cent; B 34 per cent; C 40 per cent; and that if a partner died, his capital
should remain in the business for a stated period at a fixed rate of interest, but that the
deceased partner’s share should be credited with an amount for Goodwill, based upon one
and a half year’s average profits, for the five years prior to his death, but be subject to
deduction of 5 per cent from the book debts. C died, and the profits of the firm for five years
were agreed at ₹20,000; ₹30,000; ₹15,000 (loss); ₹5,000 (loss); and ₹45,000 respectively.
Book Debts stood at ₹90,000.
Prepare a statement showing the amount of Goodwill to be credited to C’s Account and give
the Journal entry in the firm’s book necessary to carry out the transactions.
[Ans. C’s Capital Account will be credited with ₹7,200]
Hint: Total Goodwill ₹22,500
Net Goodwill = 22,500 - 4,500 (5% of Book Debts) = ₹ 18,000
40
C’s Share = 18,000 × = ₹7,200
100

Q. 55. A, B and C were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On 31 st March,
2022 their Balance Sheet was as under :

Liabilities ₹ Assets ₹

Creditors 7,000 Buildings 20,000

Reserves 10,000 Machinery 30,000

A's Capital 30,000 Stock 10,000

B's Capital 25,000 Patents 6,000

C’s Capital 15,000 70,000 Cash 21,000

87,000 87,000

C died on 1st October, 2022. It was agreed between his executors and the remaining partners
that:
(a) Goodwill be valued at 2 year’s purchase of the average profits of the previous five years,
which were 2018 : ₹15,000; 2019 : ₹13,000; 2020 : ₹12,000; 2021: 115,000 and 2022 :
₹20,000.
(b) Patents be valued at ₹8,000; Machinery at ₹28,000; Buildings at ₹30,000.
(c) Profit for the year 2022-23 be taken as having accrued at the same rate as the previous
year.
(d) Interest on capital be provided at 10% p.a.
(e) A sum of ₹7,750 was paid to his executor’s immediately.
Prepare C’s Capital Account and his executor’s account at the time of his death.
[Ans. Profit on Revaluation ₹ 10,000; Balance of C’s Executor’s Account ₹20,000.]
Q. 56. B, C and D were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On 31st March,
2023, their Balance Sheet was as follows :
 Liabilities ₹ Assets ₹

Creditors 43,000 Cash 10,200

Bills Payable 17,000 Stock 24,500

General Reserve 70,000 Debtors 27,300

Capitals : Land and Building 1,40,000

B 40,000 Profit and Loss A/c 70,000

C 50,000

D 52,000 1,42,000

2,72,000 2,72,000

B died on 30th June, 2023. The partnership deed provided for the following on the death of a
partner :
(i) Goodwill of the firm was to be valued at 3 years’ purchase of the average profits of last 5
years. The profits for the years ending 31-3-2022, 31-3-2021, 31-3-2020 and 31-3-2019 were
₹70,000; ₹60,000; ₹50,000 and ₹40,000 respectively.
(ii) B’s share of profit or loss till the date of his death was to be calculated on the basis of the
profit or loss for the year ending 31st March, 2023.
You are required to calculate the following :
(i) Goodwill of the firm and B’s share of goodwill at the time of his death.
(ii) B’s share in the profit or loss of the firm till the date of his death.
(iii) Prepare B’s Capital A/c at the time of his death to be presented to his executors.
[Ans. B’s share of Goodwill ₹45,000; B’s share in loss of the firm (for 3 months) ₹8,750;
Amount due to B’s Executors ₹76,250.]
Q. 57. Arun, Varan and Karan were partners in a firm sharing profits in the ratio of 4 : 3 : 3. On
31-3-2014, their Balance Sheet was as follows :

Liabilities ₹ Assets ₹

Creditors 17,000 Cash 8,000

Bills Payable 12,000 Debtors 13,000

Karan’s Loan 28,000 Bills Receivables 9,000

Capitals : Furniture 27,000

Arun 70,000 Machinery 1,25,000

Vamn 68,000 1,38,000 Karan’s Capital 13,000

1,95,000 1,95,000
On 30.9.2014, Karan died. The Partnership Deed provided for the following to the executors
of the deceased partner :
(a) His share in the goodwill of the firm calculated on the basis of three years’ purchase of the
average profits of the last four years. The profits of the last four years were ₹ 1,90,000; ₹
1,70,000; ₹ 1,80,000 and ₹ 1,60,000 respectively.
(b) His share in the profits of the firm till the date of his death calculated on the basis of the
average profits of the last four years.
(c) Interest @ 8% p.a. on the credit balance, if any, in his Capital Account.
(d) Interest on his loan @12% p.a.
Prepare Karan’s Capital Account to be presented to his executors, assuming that his loan and
interest on loan were transferred to his Capital Account.
(C.B.S.E. 2015, All India)
[Ans. Balance due to Karan’s Executors ₹2,00,430.]
Hint: Interest on capital will not be allowed since Karan’s Capital Account shows a debit
balance.
Q. 58. Ram, Krishna and Mohan are partners in a firm, sharing profits and losses in the ratio
of 3 : 5 : 2. On 31st March, 2020, their Balance Sheet was as under :
BALANCE SHEET
as at 31st March, 2020

Liabilities ₹ Assets ₹

Creditors 39,200 Land and Building 48,000

General Reserve 16,000 Plant 72,000

Capital A/cs : Inventory 34,000

Ram 76,800 T rade Marks 26,400

Krishna 69,600 Bills Receivables 39,200

Mohan 54,000 2,00,400 Cash in Hand 24,000

Advertisement Suspense 12,000

2,55,600 2,55,600

Krishna died on 30th September, 2020. An agreement was reached amongst Ram, Mohan
and Krishna’s legal representative that:
(a) Goodwill to be valued at 2 year’s purchase of the average profits of the previous three
years, which were :

Year : 2021-18 2022-19 2019-20

Profit: ₹ 31,200 ₹28,800 ₹36,000

(b) Trade marks to be revalued at ₹ 19,200; plant at 80% of its book value and land building
at ₹57,600.
(c) Krishna’s share of profit to the date of his death to be calculated on the basis of previous
year’s profit.
(d) Interest on capital to be provided @10% per annum.
(e) ₹60,080 to be paid in cash to Krishna’s legal representative and balance to be transferred
to the legal representative’s loan account.
You are required to prepare :
(i) Revaluation Account.
(ii) Krishna’s Capital Account, and
(iii) Krishna’s Legal Representative’s Account.
[Ans. Amount transferred to Krishna’s Legal Representative’s Loan A/c ₹ 50,000.]
Q. 59. P, Q and R were partners sharing profits in the ratio of 2 : 2 : 1. The firm closes its
books on March 31 every year. On June 30, 2017, R died. The following information is
provided on /₹’s death:
(i) Balance in his capital account in the beginning of the year was ₹6,50,000.
(ii) He withdrew ₹ 60,000 on May 15, 2017 for his personal use.
On the date of death of a partner the partnership deed provided for the following:
(a) Interest on capital @ 10 % per annum.
(b) Interest on drawings @ 12 % per annum.
(c) His share in the profit of the firm till the date of death, to be calculated on the basis of the
rate of Net Profit on Sales of the previous year, which was 25 %. The Sales of the firm till June
30, 2017 were ₹6,00,000.
Prepare R’s Capital Account on his death to be presented to his executors.
(C.B.S.E. Sample Paper, 2018)
[Ans. Amount due to R’s Executor’s ₹6,35,350.]
Q. 60. Rita, Nina and Mita are partners in a firm sharing profits and losses in the ratio of 3:2:1.
Mita dies on 1st April, 2017. On the date of her death, it was decided to value goodwill on the
basis of two year’s purchase of weighted average profits of the firm for the last three years.
The profits of the last three years and weights assigned were :

Year Profit (₹) Weights assigned

2014-15 30,000 1

(including gain from

speculation ₹ 10,000)

2019-16 80,000 2

2020-17 1,00,000 3

You are required to :

(i) Calculate the firm’s goodwill on the date of Mita’s death (Show the working with the formula).
(ii) Pass the necessary journal entry to credit Mita’s Capital Account with her share of goodwill.
(I.S.C. 2022)
[Ans. Rita’s Capital A/c Dr. 16,000

Nina’s Capital A/c Dr. 10,667

To Mita’s Capital A/c 26,667]

Q. 61 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 Assets Amount

₹ ₹

Creditors 3,00,000 Fixed Assets 7,00,000

Contingency Reserve 1,00,000 Stock 2,00,000

Capitals : Debtors 1,50,000

Meera 4,00,000 Cash at Bank 3,50,000

Sarthak 3,50,000

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 :
(i) Balance in his Capital Account.
(ii) His share of goodwill will be calculated on the basis of thrice the average of the past 4
year’s Profits.
(iii) 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.
(iv) Interest on capital @ 12% p.a. up to the date of his death.
The firm’s profits for the last four years were :
2014-15 : ₹ 1,20,000, 2015-16: ₹2,00,000, 2016-17: ₹2,60,000 and 2017-18 ₹2,20,000.
Sarthak’s executors were paid the amount due immediately. Prepare Sarthak’s Capital
Account to be presented to his executors. (C.B.S.E. 2019, Rajasthan)
[Ans. Amount due to Sarthak’s Executors ₹6,58,750]
Q, 62. M, N and O were partners in a firm sharing profits and losses equally. Their Balance
Sheet as at 31 st March, 2023 was as follows :

Liabilities ₹ Assets ₹

Capitals: Plant and Machinery 60,000

M 70,000 Stock 30,000

N 70,000 Sundry Debtors 95,000

O 70,000 2,10,000 Cash at Bank 40,000

General Reserve 30,000 Cash in Hand 35,000

Creditors 20,000

2,60,000 2,60,000

N died on 12th June, 2023. According to the Partnership Deed, executors of the deceased
partner are entitled to :
(i) Balance of partner’s capital account.
(ii) Interest on Capital @5% p.a.
(iii) Share of goodwill calculated on the basis of twice the average of past three year’s profits
and
(iv) Share of profits from the closure of the last accounting year till the date of death on the
basis of twice the average of three completed year’s profits before death.
Profits for the years ended 31st March 2021, 2022 and 2023 were ₹ 80,000, ₹90,000 and ₹
1,00,000 respectively. Show the working for deceased partner’s share of goodwill and profits
till the date of his death. Pass the necessary' journal entries and prepare A’s Capital Account
to be rendered to his executors.
[Ans. Amount due to N's Executors ₹ 1,52,700.]
Hint: ATs share of Profit ₹ 12,000.
Q. 63. L, M and N were partners sharing profits and losses in the ratio of 5 : 3 : 2. Their Balance
Sheet as at 1.4.2022 was as under :

Liabilities ₹ Assets ₹

Sundry Creditors 20,000 Cash 8,000

Reserves 9,000 Debtors 22,000

Capitals : Stock 20,000

L 50,000 Machinery 67,000

M 30,000 Investments 12,000

N 20,000 1,00,000

1,29,000 1,29,000

‘N’ died on 5th November, 2022 and according to the partnership deed his executors were
entitled to be paid as under :
(a) The capital to his credit at the time of his death and interest thereon @ 8% per annum.
(b) His share of Reserves.
(c) His share of profits for the intervening period will be based on the sales during that period,
which were calculated as ₹2,40,000. The rate of profit during past 4 years had been 15% on
sales.
(d) Goodwill according to his share of profit to be calculated by taking thrice the amount of the
average profit of the last four years less 25%. The profits of the previous years were :
2019 ₹ 10,500
2020 ₹ 12,000
2021 ₹ 12,500
2022 ₹ 13,000
The investments were sold at par and his executors were paid out. Pass the necessary journal
entries and write the account of the executors of N.
[Ans. Amount paid to N’s executors ₹35,360.]
8 219
Hint: Interest on Capital : 20,000 × 100 × 365 = ₹960.

Q. 64 Pranav, Karan and Rahim were partners in a firm sharing profits and losses in the ratio
of 2 : 2 : 1. On 31 st March, 2017 their Balance Sheet was as follows :
BALANCE SHEET OF PRANAV, KARAN AND RAHIM
as at 31.3.2017

Liabilities Amount Assets Amount

₹ ₹

Creditors 3,00,000 Fixed Assets 4,50,000

General Reserve 1,50,000 Stock 1,50,000

Capitals : Debtors 2,00,000

Pranav 2,00,000 Bank 1,50,000

Karan 2,00,000

Rahim 1,00,000 5,00,000

9,50,000 9,50,000

Karan died on 12.6.2017. According to the partnership deed, the legal representatives of the
deceased partner were entitled to the following :
(i) Balance in his Capital Account.
(ii) Interest on Capital @12% p.a.
(iii) Share of goodwill. Goodwill of the firm on Karan’s death was valued at ₹60,000.
(iv) Share in the profits of the firm till the date of his death, calculated on the basis of last year’s
profit. The profit of the firm for the year ended 31.3.2017 was ₹5,00,000.
Prepare Karan’s Capital Account to be presented to his representatives.
(C.B.S.E. 2018)
[Ans. Amount due to Karan’s Executors ₹3,28,800.]
Hints : Interest on Capital for 73 days ₹4,800; Share of Profit ₹40,000.

65 X and Y are partners. The Partnership Deed provides inter alia:

(a) That the Accounts be balanced on 31st March every year.
(b) That the profits be divided as: X one-half, Y one-third and carried to a Reserve one-sixth.
(c) That in the event of the death of a partner, his Executors be entitled to be paid:
(i) The Capital to his credit till the date of death.
(ii) His proportion of profits till the date of death based on the average profits of the last three
completed years.
(iii) By way of Goodwill, his proportion of the total profits for the three preceding years.
(d) BALANCE SHEET as at 31st March, 2023

Liabilities ₹ Assets ₹

Capital A/cs: Sundry Assets 21,000

X 9,000

Y 6,000 15,000

Reserve 3,000

Creditors 3,000

21,000 21,000

Profits for three years ended 31st March, were: 2021—₹ 4,200; 2022—₹ 3,900; 2023—₹
4,500. Y died on 1st August, 2023. Prepare necessary accounts.
[Ans.: Amount due to Y's Executors—₹ 12,800.]
Q. 66 Brown and Smith are partners. The partnership deed provides :
(i) That the Accounts be balanced on 31st December each year.
(ii) That the profits be divided as follows : Brown 1/2; Smith 1/3 and carried to a Reserve
account 1/6.
(iii) That in the event of the death of a partner, his executors be entitled to be paid out:
(a) The Capital to his credit at the date of death.
(b) His proportion of Reserve at the date of last Balance Sheet.
(c) His proportion of profit to date of death based on the average profits of the last three
completed years.
(d) By way of goodwill his proportion of the total profits for the three preceding years.
On 31st December, 2021, the ledger balances were :

₹ ₹

Brown’s Capital 9,000

Smith’s Capital 6,000

Reserve 3,000

Creditors 3,000

Bills Receivable 2,000

Investments 5,000

Cash 14,000

21,000 21,000

The profits for three years were :

2019 ₹4,200; 2020 ₹3,900; 2021 ₹4,500. Smith died on 1st May, 2022. Show the accounts as
between the firm and Smith’s executors as on May 1st, 2022.
[Ans. Balance due to Smith’s Executors ₹ 12,800.]
Q. 67. Risha and Nisha were partners. The partnership deed provides :
(i) That the accounts be balanced on 31st December each year.
(ii) The profits be divided as follows :
Risha one-half, Nisha one-third and carried to Reserve account one-sixth.
(iii) That in the event of death of a partner, her executor will be entitled to the following :
(a) The capital to her credit at the date of death.
(b) Her proportion of profit to date of death based on the average profits of the last three
completed years.
(c) Her share of goodwill based on three year’s purchase of the average profits for the three
preceding completed years.
On 31st December, 2020 the Trial Balance was as under :

Particulars Dr. (₹) Cr. (₹)

Risha’s Capital 90,000

Nisha’s Capital 60,000

Reserves 30,000

Bills Receivables 50,000

Investments 40,000

Cash 1,10,000

Creditors 20,000

2,00,000 2,00,000

The profits for the three years were : 2018 ₹4,200; 2019 ₹3,900 and 2020 ₹4,500.
Nisha died on 31st May, 2021. Draw up the deceased Partner’s Capital A/c and Executor’s
A/c.
[Ans. Balance due to Nisha’s Executor’s ₹77,740.]

IMP ** Q. 68. X, Y and Z were partners sharing profits in the ratio of 3 : 2 : 1. As at 31st March,
2022, their Balance Sheet stood as under :

Liabilities ₹ Assets ₹

Sundry Creditors 44,000 Cash at Bank 22,000

Reserve 90,000 Stock 1,20,000

Capitals : Debtors 64,000

X 2,00,000 Investments 2,50,000

Y 1,50,000 Fixed Assets 1,28,000

Z 1,00,000 4,50,000

5,84,000 5,84,000

Y died on 31st July, 2022. The partnership deed provides that the executors of the deceased
partner are entitled to :
(i) The Capital to his credit at the time of his death;
(ii) His share of reserves;
(iii) His share of profits to the date of death based on the average profits of the last three
completed years, less 10%, and
(iv) Goodwill according to his proportion of the total profits for the three preceding years, which
were ₹80,000; ₹ 1,30,000 and ₹ 1,50,000 respectively.
The Investments were sold at par and Y’s executor’s were paid off.
Prepare Partner’s Capital Accounts, Y’s Executor’s Account and Balance Sheet of the
surviving partners X and Z.
[Ans. Amount paid to Y’s executor’s ₹ 3,12,000; Y’s share of profit ₹12,000; Y’s share of
goodwill ₹ 1,20,000; X’s Capital ₹ 1,55,000 and Z’s Capital ₹85,000; Bank Loan ₹40,000; Total
of Balance Sheet ₹3,24,000.]

69 The Balance Sheet of X, Y and Z as at 31st March, 2023 was:

Liabilities ₹ Assets ₹

Bills Payable 2,000 Cash at Bank 5,800

Employees' Provident Fund 5,000 Bills Receivable 800

Workmen Compensation
Reserve 6,000 Stock 9,000
General Reserve 6,000 Sundry Debtors 16,000

Loans 7,100 Furniture 2,000

Capital A/cs: Plant and Machinery 6,500

X 22,750 Building 30,000

Y 15,250 Advertisement Suspense A/c 6,000

Z 12,000 50,000

76,100 76,100

The profit-sharing ratio was 3:2:1. Z died on 31st July, 2023. 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: 2023: ₹ 24,000; 2022: ₹ 16,000; 2021:
₹ 20,000; 2020: ₹ 10,000 and 2019:₹ 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 Zs 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.
[Ans.: Gain (Profit) on Revaluation—₹ 2,400; Amount transferred to Z's Executors' Loan
A/c—₹ 10,000.]
[Hint: Z's Share in Goodwill = ₹ 7,500; Z's Share in Profit from the date of last Balance Sheet
till the date of death = ₹ 24,000 × 4/12 × 1 /6 = ₹ 1,333.

Q. 70 Aditi, Kartik and Tina 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 :
BALANCE SHEET OF ADITI, KARTIK AND TINA
as at 31st March, 2019

Liabilities ₹ Assets ₹

Creditors 96,000 Furniture 4,30,000

Capitals : Stock 1,50,000

Aditi 3,00,000 Debtors 83,000

Kartik 2,00,000 Cash 33,000

Tina 1,00,000 6,00,000

 6,96,000 6,96,000

Aditi died on 1st November, 2019. It was agreed that:

(i) Goodwill of the firm be valued at ₹ 1,00,000.
(ii) Profit for the year 2019-20 be taken as having accrued at the same rate as the previous
year 2018-19. Profit for the year 2018-19 was ₹96,000.
(iii) Half the amount was paid to Aditi’s executors immediately and the remaining half will be
paid in two equal annual instalments with interest @ 6% p.a.
Pass the necessary journal entries to record the above transactions in the books of the firm
on the date of her death. (C.B.S.E. 2020, Rajasthan)
[Ans. Balance amount due to Aditi’s Executor’s ₹ 1,89,000.]

Hint: (i) Aditi’s Capital A/c Dr. 3,78,000

To Aditi’s Executor’s A/c 3,78,000

(ii) Aditi’s Executor’s A/c Dr. 3,78,000

To Bank A/c 1,89,000

Adjustment of Capital
71. Ajay, Salil and Ravi were partners in a firm sharing profits in the ratio of 5 :3 :2. Ajay died
on 20th February, 2023. The Balance Sheet of the firm on that date was as follows:

Liabilities ₹ Assets ₹

Creditors 19,000 Machinery 41,000

General Reserve 20,000 Furniture 6,000

Loan by Ajay 7,000 Stock 9,000

Capital A/cs: Debtors 15,000

Ajay 12,000 Cash 3,000

Salil 16,000 Profit & Loss A/c 10,000

Ravi 10,000 38,000

84,000 84,000

According to the Partnership Deed, on the death of a partner, the executor of the deceased
partner will be entitled to:
(i) Balance in Capital Account.
(ii) His share in profit/loss on revaluation of assets and reassessment of liabilities which were
as follows:
(a) Machinery is to be revalued at ₹ 45,000 and furniture at ₹ 7,000.
(b) A provision of 10% was to be created for Doubtful Debts.
(iii) The amount payable to Ajay was transferred to his Executors' Loan Account which was to
be paid later. Prepare Revaluation Account, Partners’ Capital Accounts, Ajay's Executors'
Account and the Balance Sheet of Salil and Ravi who decided to continue the business
keeping their capital balances in their new profit- sharing ratio. Any surplus or deficit was to
be transferred to Current Accounts of the partners.
[Ans.: Revaluation Profit—₹ 3,500; Ajay's Executors' Loan—₹ 25,750; Partners' Capital
Account Balances:
Salil—₹ 19,650;Ravi—₹ 13,100; Current Account Balances: Salil—₹ 400 (Cr.); Ravi—₹ 400
(Dr.);
Total of Balance Sheet—₹ 77,900.]
 DISSOLUTION OF A PARTNER
Q.1 Balance Sheet of P, Q and R as at 31st March, 2023, who were sharing profits in the ratio
of 5 : 3 :1, was:

Liabilities ₹ Assets ₹

Bills Payable 40,000 Cash at Bank 40,000

Loan from Bank 30,000 Stock 19,000

General Reserve 9,000 Sundry Debtors 42,000

Less: Provision for Doubtful

Capital A/cs: Debts 2,000 40,000

P 44,000 Building 40,000

Q 36,000 Plant and Machinery 40,000

R 20,000 1,00,000

1,79,000 1,79,000

The partners dissolved the business. Assets realised—Stock ₹ 23,400; Debtors 50%; Building
and Plant and Machinery 10% less than their book value. Bills Payable were settled for ₹
32,000. There was an Outstanding Bill of electricity ₹ 800 which was paid. Realisation
expenses ₹ 1,250 were also paid.
Prepare Realisation Account, Partners' Capital Accounts and Bank Account.
[Ans.: Loss on Realisation—₹ 16,650; Amount Payable to P—₹ 39,750; Q—₹ 33,450;
R—₹ 19,150; Total of Bank Account—₹ 1,56,400.]
2. . A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 31st
March, 2023, their Balance Sheet was as follows:
BALANCE SHEET as at 31st March, 2023

Liabilities ₹ Assets ₹

Creditors 38,000 Cash at Bank 11,500

Loan by Mrs. A 10,000 Stock 6,000

Loan by B 15,000 Debtors 19,000

Reserve 5,000 Furniture 4,000

A's Capital 10,000 Plant 28,000

B's Capital 8,000 18,000 Investments 10,000

Profit & Loss A/c 7,500

 86,000 86,000

The firm was dissolved on 31st March, 2023 and both the partners agreed to the following:
(a) A took Investments at an agreed value of ₹ 8,000. He also agreed to settle Loan by Mrs.
A.
(b) Other assets realised as: Stock—₹ 5,000; Debtors—₹ 18,500; Furniture—₹ 4,500; Plant—
₹ 25,000.
(c) Expenses of realisation came to ₹ 1,600.
(d) Creditors agreed to accept ₹ 37,000 in full settlement of their claims.
Prepare Realisation Account, Partners' Capital Accounts and Bank Account.
(NCERT, Modified)
[Ans.: Loss on Realisation—₹ 6,600; A to be paid—₹ 6,540; B to be paid—₹ 4,360;
Total of Bank Account—₹ 64,500.]
3. Ashu and Harish are partners sharing profit and losses as 3 : 2. They decided to dissolve
the firm on 31st March, 2023. Their Balance Sheet on the above date was:

Liabilities ₹ Assets ₹

Capital A/cs: Building 80,000

Ashu 1,08,000 Machinery 70,000

Harish 54,000 1,62,000 Furniture 14,000

Creditors 88,000 Stock 20,000

Bank Overdraft 50,000 Investments 60,000

Debtors 48,000

Cash in Hand 8,000

3,00,000 3,00,000

Ashu is to take over the building at ₹ 95,000 and Machinery and Furniture is taken over by
Harish at value of ₹ 80,000. Ashu agreed to pay Creditor and Harish agreed to meet Bank
overdraft. Stock and Investments are taken by both partner in profit-sharing ratio. Debtors
realised for ₹ 46,000, expenses of realisation amounted to ₹ 3,000. Prepare necessary Ledger
Accounts. (NCERT, Modified)
[Ans.: Gain (Profit) on Realisation—₹ 6,000; Final Payments: Ashu—₹ 56,600.
Amount brought in by Harish—₹ 5,600; Total of Cash Account—₹ 59,600.]
4. A, B and C were equal partners. On 31st March, 2023, their Balance Sheet stood as:

Liabilities ₹ Assets ₹

Creditors 50,400 Cash 3,700

General Reserve 12,000 Stock 20,100

Capital A/cs: Debtors 62,600

A 40,000 Loan to A 10,000

B 25,000 Investments 16,000

C 15,000 80,000 Furniture 6,500

Building 23,500

1,42,400 1,42,400

The firm was dissolved on the above date on the following terms:
(a) For the purpose of dissolution, Investments were valued at ₹ 18,000 and A took over the
Investments at this value.
(b) Fixed Assets realised ₹ 29,700 whereas Stock and Debtors realised ₹ 80,000.
(c) Expenses of realisation paid were ₹ 1,300.
(d) Creditors allowed discount of ₹ 800.
(e) One Bill Receivable for ₹1,500 under discount was dishonoured as the acceptor had
become insolvent and was unable to pay anything and hence the bill had to be met by the
firm.
Prepare Realisation Account, Partners' Capital Accounts and Cash Account showing how the
accounts would finally be settled among the partners.
[Ans.: Loss on Realisation—₹ 3,000; Cash paid to A, B and C—₹ 25,000; ₹ 28,000;
₹ 18,000 respectively. Total of Cash Account—₹ 1,23,400.]
5. Michael, Jackson and John are in partnership sharing profits and losses in the proportions
of 1/2,1/3 and 1/6 respectively. On 31 st March, 2023, they decide to dissolve the partnership
and the position of the firm on this date is represented by the following Balance Sheet:

Liabilities ₹ Assets ₹

Creditors 40,000 Cash at Bank 3,000

Loan by Michael 10,000 Stock 50,000

Workmen Compensation
Reserve 21,000 Sundry Debtors 50,000

Capital A/cs: Land and Building 57,000

Michael 60,000 Profit & Loss A/c 15,000

Jackson 40,000 Advertisement Suspense A/c 6,000

John 10,000 1,10,000

1,81,000 1,81,000

During the realisation process, a liability under a suit for damages is settled at ₹ 20,000 as
against ₹ 5,000 provided for in the books of the firm.
Land and Building were sold for ₹ 40,000 and the Stock and Sundry Debtors realised ₹ 30,000
and ₹ 42,000 respectively. The expenses of realisation amounted to ₹ 1,200.
There was a car in the firm, which was written off from the books. It was taken by Michael for₹
20,000. He also agreed to pay Outstanding Salary of ₹ 20,000 not provided in books.
Prepare Realisation Account, Partners’ Capital Accounts and Bank Account in the books of
the firm.
[Ans.: Loss on Realisation—₹ 61,200; Cash paid to Michael—₹ 29,400; Jackson—₹ 19,600;
Cash brought in by John—₹ 200. Total of Bank Account—₹ 1,15,200.]
[Hint: Payment to creditors—₹ 55,000, i.e., ₹ 40,000 + ₹ 15,000.]
6. Prashant and Rajesh are partners in a firm sharing profits and losses in the ratio of 3 : 2.
On 31st March, 2023, their Balance Sheet was:

Liabilities ₹ Assets ₹

Bank Overdraft 30,000 Cash in Hand 6,000

General Reserve 56,000 Bank Balance 10,000

Investments Fluctuation Reserve 20,000 Sundry Debtors 26,000

Loan by Prashant 34,000 Less: Provision for Doubtful 24,000

Debts 2,000

Capital A/c: Investments 40,000

Prashant 50,000 Stock 10,000

Furniture 10,000

Building 60,000

Rajesh's Capital 30,000

1,90,000 1,90,000

On that date, the partners decide to dissolve the firm. Prashant took Investments at an agreed
value of ₹ 35,000. Other assets were realised as follows:
Sundry Debtors: Full amount. The firm could realise Stock at 15% less and Building was sold
at₹ 1,00,000. Compensation to employees paid by the firm was ₹ 10,000. This liability was not
provided for in the above Balance Sheet.
You are required to close the books of the firm by preparing Realisation Account, Partners’
Capital Accounts and Bank Account.
[Ans.: Gain (Profit) on Realisation—₹ 45,500; Payment to Prashant—₹ 75,900;
Rajesh—₹ 10,600; Total of Bank Account—₹ 1,60,500.]
Q. 7 The following is the Balance Sheet of A and 6 as at 31st March, 2023. The profit sharing
ratios of the partners are 3 : 2.

Liabilities ₹ Assets ₹
Creditors 97,500 Land & Buildings 30,000

Capital Accounts : Motor Vehicles 18,300

A 85,000 Stock 72,800

B 63,000 1,48,000 Debtors 1,13,200

Less: Provision for

Bad Debts 2,450 1,10,550

Cash at Bank 13,650

2,45,500 2,45,500

The partners decided to dissolve the firm on and from the date of the Balance Sheet. Motor
Vehicles and Stock were sold for cash at ₹ 16,950 and ₹77,600 respectively and all Debtors
were realised in full. Land & Buildings were sold' at ₹43,500. Creditors were paid off subject
to discount of ₹ 1,700. Expenses of realisation were ₹ 1,250.
Prepare Realisation Account, Bank Account and Partners’ Capital Accounts to close the books
of the firm as a result of its dissolution.
[Ans. Profit on Realisation ₹ 19,850; Amount paid to A ₹96,910 and B ₹70,940; Total of Bank
A/c ₹2,64,900.]
Hint: Amount realised from Debtors ₹1,13,200.
Q. 8 A, B and C were in partnership sharing profits in the ratio of 2 : 1 : 1. Their Balance Sheet
showed the following position on the date of dissolution :

Liabilities ₹ Assets ₹

Creditors 40,000 Fixed Assets 50,000

Bills Payable 10,000 Stock 60,000

A’s Loan 20,000 Debtors 30,000

M₹ A’s Loan 16,000 Less : Provision 2,000 28,000

Workmen Compensation Reserve 20,000 Furniture 20,000

Capitals : A 40,000 Goodwill 38,000

B 20,000 Cash at Bank 10,000

C 20,000

1,86,000 1,86,000

I. A agreed to take over furniture at 20% less than the book value.
II. Fixed assets realised ₹32,000 and stock ₹55,000.
III. Bad Debts amounted to ₹5,000.
IV. Expenses of realisation were ₹3,000. Creditors were paid at a discount of 5%.
V. There was a claim of ₹6,400 for damages against the firm. It had to be paid.
Prepare necessary accounts.
[Ans. Loss on Realisation ₹55,400; Final payments: A ₹6,300; B ₹11,150; C ₹11,150; Total of
Bank A/c ₹ 1,22,000.]
Hint : Nothing is mentioned in the question about the payment of B/P and M₹ A’s Loan. It will
be assumed that these will be paid in full.
Q.9 X, Y and Z are in partnership, sharing profits and losses equally. They decided to dissolve
the partnership on 31st March, 2021, at which date the Balance Sheet of the firm was as
follows :

Liabilities ₹ Assets ₹

Capital A/cs : Premises 80,000

X 90,000 Machinery 68,000

Y 60,000 Stock 40,000

Z 40,000 Sundry Debtors 30,000

Current A/cs: Bills Receivable 36,000

X 13,000 Cash at Bank 30,000

Y 4,000 Current A/c — Z 3,000

Sundry Creditors 60,000

Advance from X 15,000

Advance from Y 5,000

2,87,000 2,87,000

The assets realised as under :

Premises 20% more; Machinery 40% less; Stock ₹5,000 more, Sundry Debtors and Bills
Receivable at book values. Expenses of realisation amounted to ₹2,000. Sundry Creditors
agreed to accept ₹57,500 in full settlement.
Show necessary ledger accounts to close the books of the firm.
[Ans. Loss on Realisation ₹5,700; Final Payments: X ₹1,01,100; Y ₹62,100; Z ₹35,100; Total
of Bank A/c ₹2,77,800.]
Q. 10 The following was the Balance Sheet of X, Y and Z as at 28.2.2021 :

Liabilities ₹ Assets ₹

Creditors 30,000 Bank 32,000

Bills Payable 10,000 Debtors 48,000

G’s Loan 18,000 Stock 19,000

Y’s Loan 20,000 Furniture 43,000

Workmen Compensation Reserve 33,000 Land and Building 1,09,000

Capitals : Z's Capital 20,000

X 75,000

Y 85,000 1,60,000

2,71,000 2,71,000

The firm was dissolved on the above date on the following terms :
(i) Debtors realized ₹29,000 and creditors and bills payable were paid at a discount of 10%.
(ii) Stock was taken over by X for ₹ 17,000 and furniture was sold to K for ₹20,000.
(iii) Land and Building was sold for ₹2,98,000.
(iv) G’s loan was paid by a cheque of the same amount.
(v) Compensation to workmen paid by the firm amounted to ₹ 15,000.
Prepare Realisation Account, Capital Accounts and Bank Account.
[Ans. Profit on Realisation ₹ 1,49,000. Final Payments : Y’s Loan ₹20,000; Capitals : X
₹1,13,667; Y ₹1,40,667; and Z ₹35,666. Total of Bank A/c ₹3,79,000.]
Hint : Workmen Compensation Reserve credited to Realisation A/c ₹ 15,000 and to capital
accounts ₹ 18,000.
Q.11 Pritam and Naresh decided to dissolve their firm on September 30,2018, when their
Balance Sheet stood as follows :

Liabilities ₹ Assets ₹

Capital Accounts: Cash at Bank 400

Pritam 40,000 Stock-in-Trade 21,500

Naresh 20,000 Bills Receivable 8,800

Loan Accounts : Sundry Debtors 45,000

Naresh 14,000 Less: Provision for

M₹ Pritam 10,000 Bad Debts 1,500 43,500

Sundry Creditors 36,000 Furniture 3,000

Outstanding Rent 500 Plant & Machinery 23,000

Goodwill 20,000

Prepaid Insurance 300

1,20,500 1,20,500
The assets were realised as follows : Stock ₹20,000; Bills Receivable ₹3,800; Furniture
₹5,100; Plant & Machinery ₹35,000; Sundry Debtors at 10% less than book value. .
Sundry Creditors allowed a discount of 5%. Pritam agreed to pay his wife’s loan. Naresh
agreed to pay outstanding rent. Expenses on dissolution came to ₹800.
Pritam and Naresh shared profits and losses in the ratio of their Capitals. Accounts were finally
settled.
Prepare Journal, Realisation Account, Capital Accounts and Bank Account.
[Ans. Loss on Realisation ₹ 14,700: Cash paid to Pritam ₹40,200 and Naresh ₹ 15,600; Total
of Bank A/c ₹ 1,04,800.]
Hint : Goodwill and Prepaid Insurance will be debited to Realisation A/c and no further entry
will be made in respect of these items.
Q.12 The following is the Balance Sheet of X and Y as at 30th June, 2022.

Liabilities ₹ Assets ₹

Sundry Creditors 20,000 Goodwill 10,000

Bills Payable 20,000 Buildings 25,000

Bank Overdraft 8,000 Plant 25,000

Outstanding Expenses 2,000 Investments 15,300

X’s brother’s Loan 20,000 Stock 8,700

Y’s Loan 10,000 Debtors 17,000

Investment Fluctuation Fund 2,800 Less : Provision 2,000 15,000

Employees’ Provident Fund 1,200 Bills Receivable 10,000

General Reserve 2,000 Cash at Bank 13,000

X’s Capital 20,000 Profit and Loss A/c (Dr. Balance) 4,000

Y’s Capital 20,000

1,26,000 1,26,000

The firm was dissolved on 30th June, 2022 and the following arrangements were decided
upon :
(a) X agreed to pay off his brother’s loan;
(b) Debtors realised ₹ 12,000;
(c) Y took over all the investments at ₹ 12,000.
(d) Other assets realised as follows :
Plant — ₹20,000, Building — ₹50,000, Goodwill — ₹6,000
(e) Sundry Creditors and bills payable were settled at 5% discount, Y accepted Stock at ₹8,000
and X took over Bills Receivable at 20% discount.
(f) Realisation Expenses amounted to ₹2,000.
You are required to pass Journal Entries.
[Ans. Profit on Realisation ₹9,800; Final Payment to X ₹35,900 and Y ₹3,900; Total of Bank
A/c ₹ 1,01,000.]

Q. 13 Mrs. Rita Chowdhary and Miss Shobha are partners in a firm, ‘Fancy Garments Exports’
sharing profits and losses equally. On 1st April, 2022, the Balance Sheet of the firm was as
follows :

Liabilities ₹ Assets ₹

Sundry Creditors 75,000 Bank 36,000

Bills Payable 30,000 Stock 75,000

Mr. Chowdhary ’s Loan 15,000 Book Debts 66,000

Reserve Fund 24,000 Less: Provision for

M₹ Rita Chowdhary’s Capital 90,000 Doubtful Debts 6,000 60,000

Miss Shobha’s Capital 30,000 Plant & Machinery 45,000

Land & Buildings 48,000

2,64,000 2,64,000

The firm was dissolved on the date given above. The following transactions took place:
(i) Mrs. Rita Chowdhary undertook to pay Mr. Chowdhary’s Loan and took over 50 per cent of
stock at a discount of 20 per cent.
(ii) Book-debts realised ₹54,000; balance of the stock was sold off at a profit of 30 per cent on
cost.
(iii) Sundry Creditors were paid out at a discount of 10 per cent. Bills payable were paid in full.
(iv) Plant and Machinery realised ₹75,000 and Land and Buildings ₹ 1,20,000.
(v) M₹ Rita Chowdhary took over the goodwill of the firm at a valuation of ₹30,000.
(vi) Realisation expenses were ₹5,250.
Show the Realisation Account, Bank Account and Partner’s Capital Accounts in the books of
the firm.
[Ans. Profit on realisation ₹ 1,32,000; Final Payments :— Rita ₹ 1,23,000 and Shobha ₹
1,08,000, Total of Bank A/c ₹3,33,750.]
Q. 14 Anurag and Prem were partners sharing profits and losses in 2 : 1. On 31st March,
2020 their Balance Sheet was as follows :

Liabilities ₹ Assets ₹

Sundry Creditors 60,000 Bank 83,000

M₹ Anurag’s Loan 80,000 Sundry Debtors 60,000

Anurag’s Loan 50,000 Less : Provision for

Workmen’s Compensation Doubtful Debts 3,000 57,000

Reserve 1,20,000 Stock 1,00,000

investment Fluctuation Reserve 10,000 Furniture 20,000

Profit and Loss 5,000 Plant 4,00,000

Capitals : Investments 45,000

Anurag 3,50,000 Advertisement Expenses 15,000

Prem 45,000 3,95,000

7,20,000 7,20,000

The firm was dissolved on the above date :

(i) Anurag took over 60% of the stock at a discount of 20%; 25% of the remaining stock was
sold at a profit of 40% on cost; Remaining stock was found obsolete and realised nothing.
(ii) Firm had to pay ₹90,000 as compensation to workers.
(iii) Sundry Creditors took over investments in full settlement.
(iv) Sundry Debtors realised at 75% and plant realised 20% less.
(v) Prem agreed to take over the responsibility of completing dissolution work and he was
given furniture as his remuneration.
(vi) Realisation expenses amounted to ₹ 10,000.
Prepare Realisation Account.
[Ans. Loss on Realisation ₹ 1,35,000.]
Hints :

(i) Book value of remaining 25% stock : 25% of 40,000 = ₹ 10,000

140
Realised value of stock : 10,000 × 100 = ₹ 14,000

(ii) Workmen’s Compensation Reserve A/c Dr. 90,000

To Realisation A/c 90,000

Realisation A/c Dr. 90,000

To Bank A/c 90,000

Workmen Compensation Reserve amounting to ₹30,000 will be transferred to the Cr. side of
Capital Accounts.
(iii) There will be no entry of Sundry Creditors taking over the investments.
(iv) There will be no entry of Prem taking over furniture as his remuneration.
Q. 15 The following is the Balance Sheet of A and B as at 31st March, 2018 :

Liabilities ₹ Assets ₹
Mrs. A’s Loan 15,000 Cash 4,200

Mrs. B’s Loan 10,000 Bank 3,400

Trade Creditors 30,000 Debtors 30,000

Bills Payable 10,000 Less: Provision 2,000 28,000

Outstanding Expenses 5,000 Investments 10,000

A : Capital 1,00,000 Stock 40,000

B : Capital 80,000 Truck 75,000

Plant and Machinery 80,000

B: Drawings 9,400

2,50,000 2,50,000

Firm was dissolved on this date.

1. Half the stock was sold at 10% less than the book value and the remaining half was taken
over by A at 20% more than the book value.
2. During the course of dissolution a liability under action for damages was settled at ₹ 12,000
against ₹ 10,000 included in the creditors.
3. Assets realised as follow :
Plant & Machinery — ₹ 1,00,000; Truck — ₹ 1,20,000; Goodwill was sold for ₹25,000; Bad
Debts amounted to ₹5,000. Half the investments were sold at book value.
4. A promised to pay off Mrs. A’s Loan and took away half the investments at 10% discount.
5. Trade Creditors and Bills Payable were due on average basis of one month after 31st
March, but were paid immediately on 31st March, at 12% discount per annum.
Prepare necessary accounts.
[Ans. Profit on Realisation ₹86,800; Final Payment to A ₹ 1,29,900 and B ₹ 1,14,000; Total of
Bank A/c ₹3,00,600]
12 1
Hints : 1. Discount received on payment to Creditors = 20,000 × × = ₹200
100 12
12 1
2. Discount received on payment to B/P = 10,000 × 100 × 12 = ₹ 100
3. Cash balance of ₹4,200 has been transferred to the debit of Bank Account.
Q. 16 The following is the Balance Sheet of A, B and C, as at 31st March, 2021:

Liabilities ₹ Assets ₹

Creditors 30,000 Bank 15,000

M₹ A’s Loan 20,000 Bills Receivable 12,000

Outstanding Salary 8,000 Stock 40,000

Investment Fluctuation Fund 10,000 Sundry Debtors 40,000

Reserves 12,000 Less : Provision for

Capital Accounts : Doubtful Debts 4,000 36,000

A 60,000 Land and Buildings 50,000

B 40,000 Furniture 10,000

C 20,000 1,20,000 Typewriters 7,000

Investments 30,000

2,00,000 2,00,000

The profit and loss sharing ratios of the partners are 3 : 2 : 1. At the above date, partners
decide to dissolve the firm. The assets realised were as follows :
(i) Bills Receivable were realised at a discount of 5%. Debtors were all good; Stock realised
₹32,000. Land and Buildings realised at 40% higher than the book value.
(ii) Furniture was sold for ₹6,000 by auction and auctioneer’s commission amounted to ₹300.
(iii) Typewriters were taken over by A for an agreed valuation of ₹5,000.
(iv) Investments were sold in the open market at a price of ₹25,000, for which a commission
of 2% was paid to the broker.
(v) Creditors agreed to accept 10% less. All other liabilities were paid off at their book value.
(vi) The firm retrenched their employees three months before the dissolution of the firm and
the firm had to pay ₹25,000 as compensation. This liability was not appearing in the above
Balance Sheet.
Close the books of the firm by preparing Realisation Account, Partner’s Capital Accounts, and
Bank Account.
[Ans. Loss on Realisation ₹8,400; Final Payment to A ₹56,800; B ₹41,200 and C ₹20,600.]
Hint : Amount realised from Sundiy Debtors : ₹40,000.
Q. 17. Following is the Balance Sheet of Ramji Lal and Panna Lal as at 31st March, 2021 :

Liabilities ₹ Assets ₹

Capitals : Goodwill 4,000

Ramji Lal 16,000 Machinery 6,000

Panna Lal 10,000 Plant 12,800

Reserves 3,600 Debtors 10,800

Workmen Compensation Reserve 2,000 Less : Provision 800 10,000

Creditors 5,400 Bank 6,800

Bills Payable 2,600

39,600 39,600
They decided to dissolve the firm. Assets are realised as follows :
(i) Machinery 10% less than book value; Plant ₹ 12,500 and Goodwill ₹2,520.
(ii) Ramji Lal is to take over Debtors amounting to ₹6,800 at ₹6,000, remaining Debtors were
realised for 90% of the book value.
(iii) One bill of ₹600 under discount having been dishonoured had to be taken up by them.
(iv) The Bill payable of ₹2,600 to be assumed by Panna Lal at that figure.
(v) Creditors are paid off at a discount of 10%.
(vi) An amount of ₹2,500 had to be paid for Workmen Compensation.
(vii) The liquidation expenses amounted to ₹400.
You are required to show the Realisation Account, Capital Accounts and Bank Account.
[Ans. Loss on Realisation ₹3,740; Amount paid to Ramji Lal ₹9,930; Amount paid to Panna
Lal ₹ 12,530; Bank Account Total ₹30,820.]
Hint : Entire amount of Workmen Compensation Reserve of ₹2,000 will be credited to
Realisation Account.
Q. 18 Raman and Richa were partners in a firm sharing profits in the ratio of 7 : 3. On 31.3.2022
the Balance Sheet of the firm was as follows :
BALANCE SHEET OF RAMAN AND RICHA
as at 31.3.2022

Liabilities ₹ Assets ₹

Capitals: Land and Building 7,50,000

Raman 7,00,000 Furniture 1,20,000

Richa 3,00,000 10,00,000 Debtors 1,32,000

Sundry Creditors 1,75,000 Stock 1,03,000

Cash 70,000

11,75,000 11,75,000

The firm was dissolved on 1.4.2022 and the assets and liabilities were settled as follows :
(i) Land and building was taken over by Raman at a depreciation of 10% for cash;
(ii) Creditors of ₹ 1,25,000 took over stock and debtors in full settlement of their claim;
(iii) Remaining creditors were paid by Richa;
(iv) Furniture realised ₹5,000 less than the book value.
(v) Expenses of realisation were ₹400.
Pass necessary journal entries for dissolution of the firm.
[Ans. Final Payment to Raman ₹5,66,720 and Richa ₹2,92,880]
Hints : (i) Prepare Realisation A/c in Working Notes. Loss on Realisation will amount to ₹
1,90,400.
(ii) No entry is to be passed for creditors taking over stock and debtors. Entry for remaining
creditors taken paid by Richa :

Realisation A/c Dr. 50,000

To Richa’s Capital A/c 50,000

Q. 19. Verma and Sharma were partners in a firm sharing profits in the ratio of 3 : 1. On
31.3.2022 their Balance Sheet was as follows :
BALANCE SHEET OF VERMA AND SHARMA
as at 31.3.2022

Liabilities ₹ Assets ₹

Capitals : Land and Building 70,000

Verma 1,20,000 Machinery 60,000

Sharma 80,000 2,00,000 Debtors 80,000

Creditors 70,000 Bank 60,000

2,70,000 2,70,000

The firm was dissolved on 1.4.2022 and the assets and liabilities were settled as follows :
(i) Creditors of ₹50,000 took over Land and Building in full settlement of their claim;
(ii) Remaining creditors were paid in cash;
(iii) Machinery was sold at a depreciation of 30%;
(iv) Debtors were collected ate cost of ₹500;
(v) Expenses of realisation were ₹ 1,700.
Pass necessary journal entries for dissolution of the firm.
[Ans. Final Payment to Verma ₹89,850 and Sharma ₹69,950.]
Hints : (i) Prepare Realisation A/c in Working Notes. It will appear as follows :
Dr. REALISATION ACCOUNT Cr.

Particulars ₹ Particulars ₹

To Land & Building 70,000 By Creditors 70,000

To Machinery 60,000 By Bank A/c (Assets realised)

To Debtors 80,000 (₹42,000 + ₹79,500) 1,21,500

To Bank A/c (Creditors paid) By Loss transferred to :

(₹70,000- ₹50,000) 20,000 Verma’s Capital A/c 30,150

To Bank A/c (Exp.) 1,700 Sharma’s Capital A/c 10,050 40,200

2,31,700 2,31,700
(ii) No entry is to be passed for creditors of ₹50,000 taking over Land and Building in full
settlement of their claim.
Q. 20 Following is the Balance Sheet of Deepak and Jyoti, who were sharing profit and losses
in the ratio of 3 : 2, as at March 31,2022 :—

Liabilities ₹ Assets ₹

Creditors 38,000 Cash 1,500

M₹ Deepak’s Loan 10,000 Bank 10,000

Bank Loan 15,000 Debtors 20,000

Capital A/cs : Less: Provision for

Deepak 10,000 Doubtful Debts 1,000 19,000

Jyoti 8,000 18,000 Stock 12,000

Current A/cs : Furniture 6,000

Deepak 2,000 Plant 30,000

Jyoti 500 2,500 P & L A/c (Dr. Balance) 5,000

83,500 83,500

The firm was dissolved on that date and the following arrangements were made:—
(i) Assets realised as follows : Debtors ₹ 18,000; Furniture ₹5,500; Plant ₹32,000.
(ii) Deepak agreed to take over stock in full settlement of his wife’s loan.
(iii) Creditors were paid at 2% discount and Bank Loan was discharged along with interest due
for six months @ 10% p.a. and
(iv) Expenses of realisation amounted to ₹ 1,800.
Show the necessary ledger accounts to close the books of the firm.
[Ans. Loss on Realisation ₹3,290; Final Payments : Deepak ₹7,026 and Jyoti ₹5,184; Total of
Cash/Bank A/c ₹67,000.]
Hint There will be no entry for the payment of Mrs. Deepak’s Loan.
Q. 21 A, B and C sharing profits in the proportion of 3 : 2 : 1 agreed upon dissolution of their
partnership firm on 31st March, 2022 on which date their balance sheet was as under :

Liabilities ₹ Assets ₹

Capital A/cs : Machinery 40,500

A 40,000 Stock-in-Trade 7,550

B 20,000 60,000 Investments 20,830

M₹ A’s Loan 10,000 Debtors 9,300

Creditors 18,500 Less : Provision for

Investments Fluctuation Fund 6,000 Doubtful Debts 600 8,700

Current A/c—‘C’ 11,500

Cash at Bank 5,420

94,500 94,500

The investments are taken over by A for ₹ 17,500. A agrees to discharge his wife’s loan. B
takes over all the Stock at ₹ 7,000 and debtors amounting to ₹5,000 at ₹4,000. Machinery is
sold for ₹67,000. The remaining debtors realise 50% of book value. The expenses of
realisation amount to ₹600.
It is found that an investment not recorded in the books is worth ₹3,000 and it is taken over by
one of the creditors at this value.
Show the necessary ledger accounts on completion of the dissolution of firm.
[Ans. Profit on realisation ₹28,470; Cash brought in by C ₹6,755; Payment to A ₹46,735 and
B ₹ 18,490. Total of Bank A/c ₹81,325.]
Hint C’s Current A/c appears on the assets side, which means that it has a debit balance. As
such, it will be transferred to the Debit side of C’s Capital Account.
Q. 22 . X, Y and Z were in partnership sharing profits and losses in the ratio of 7:2:1 and the
Balance Sheet of the firm stood on 31st March, 2022, as under:—

Liabilities ₹ Assets ₹

Creditors 3,142 Cash in hand 244

Provision for Depreciation Debtors 1,746

on Machinery 4,000 Stock 3,498

Capital Accounts : 100 Shares in B Co. Ltd. 2,000

X 3,582 60 Shares in C Co. Ltd. 480

Y 2,720 Patents " 7,600

Z 16,124 22,426 Machinery 6,000

Buildings 5,000

Goodwill 3,000

29,568 29,568

On 31st March, 2022, it was decided to dissolve the firm on the following terms:
(i) X is to take over the buildings at ₹7,300.
(ii) Y, who will continue with business, to take over Goodwill, Stock and Debtors at book values,
Patents at ₹6,500 and Machinery at ₹ 1,500. He also agreed to pay the Credito₹
(iii) Z agreed to take the shares in C Co. Ltd. at ₹5 each.
(iv) The shares in B Co. Ltd. to be divided in profit sharing ratio.
Show the ledger accounts to record the dissolution.
[Ans. Profit on realisation ₹520; Cash brought in by X ₹4,754 and Y ₹ 10,678; Final payment
to Z ₹ 15,676: Total of Cash A/c ₹ 15,676.]
Q. 23 . Following is the balance sheet of P, Q and R who were sharing profits and losses in
the ratio of 3 : 2 : 1.

Liabilities ₹ Assets ₹

Bank Overdraft 12,000 Debtors 20,000

Creditors 70,000 Less: Provision 1,200 18,800

M₹ P's Loan 25,800 Stock 40,000

Capital Accounts : 3,000 Shares in ‘A’ Ltd. 30,000

P 1,20,000 Motor Car 75,000

Q 95,000 Plant 80,000

R 5,000 Advertisement Suspense A/c 84,000

3,27,800 3,27,800

The firm was dissolved on that date and the following arrangements were made:
I. Assets realised as follows: Debtors ₹ 15,000; Plant at 30% discount.
II. Stock was valued at ₹ 3 6,000 and this was taken over by P and Q equally.
III. Market value of the shares of A Ltd. is ₹ 16 per share. Half the shares were sold in the
market and the balance half were taken over by P and Q in their profit sharing ratio.
IV. A creditor for ₹50,000 took over Motor Car in full settlement of his claim and the balance
of creditors were paid at a discount of 2%.
V. Expenses of realisation amounted to ₹6,000. P agreed to discharge his wife’s Loan.
Prepare Journal entries and Ledger accounts.
[Ans. Loss on Realisation ₹44,400. R brings in ₹16,400; Final payment to P ₹49,200 and Q
₹24,600. Total of Bank A/c ₹ 1,11,400.]
Note : Bank Overdraft is short-term borrowing. It will be first transferred to the Cr. of Realisation
A/c and then paid off.
Q. 24. P, Q and R were partners in a firm sharing profits in the ratio of 1 : 2 : 2. Their Balance
Sheet as at 31st March, 2022 was as follows :
BALANCE SHEET OF P. Q AND R
as at 31st March, 2022

Liabilities ₹ Assets ₹

Creditors 2,10,000 Land and Buildings 5,00,000

Bank Overdraft 50,000 Office Equipment 8,000

Q's Loan 40,000 Stock 2,00,000

Capitals : Debtors 60,000

P 1,00,000 Less : Provision for

Q 2,00,000 Doubtful Debts 3,000 57,000

R 2,00,000 5,00,000 Bank 35,000

8,00,000 8,00,000

Partners agreed to dissolve the firm on that date. You are given the following information about
dissolution :
(i) One of the Debtors for ₹20,000 paid ₹ 12,000 in full settlement of his account and debtors
of ₹5,000 were proved bad.
(ii) Part of the stock was sold for ₹20,000 (being 25% more than the book value). (Hi) Office
Equipment was accepted by the creditor for ₹7,000 in full settlement.
Another creditor of ₹40,000 was paid only 40% in full settlement of his account and remaining
creditors accepted remaining stock in full settlement of their account.
(iv) An unrecorded asset of ₹ 20,000 was handed over to an unrecorded liability of ₹ 15,000
in full settlement.
(v) Land & Buildings were sold at a loss of 20%.
(vi) Q’s Loan was settled by payment of ₹3 0,000.
(vii) Realistion expenses ₹ 16,000 were paid by R.
You are required to prepare the necessary accounts.
[Ans. Loss on Realisation ₹ 1,10,000; Final Payment to P ₹78,000; Q ₹ 1,56,000 and R
₹1,72,000; Total of Bank A/c ₹ 5,02,000.]
Hints : (i) There will be no entry for unrecorded asset given to unrecorded liability.
(ii) Entry for payment of Q’s Loan will be :

Q's Loan A/c Dr. 40,000

To Bank A/c 30,000

To Realisation A/c 10,000

Q. 25. A, B and C were partners in a firm sharing profits & losses in the ratio of 2:2:1. The
Balance Sheet of the firm at the date of dissolution was as follows:

Liabilities ₹ Assets ₹

Bank Overdraft 21,000 Debtors 40,000

Creditors 86,000 Stock 60,000

Provident Fund 18,000 Investments 25,000

Capital Accounts : Machinery 80,000

A 1,05,000 Prepaid Expenses 3,200

B 42,000 Goodwill 38,800

C’s Capital Account 25,000

2,72,000 2,72,000

You are informed that:

(1) They appointed B to realise the assets. He is to receive 5% of the amounts realised from
Debtors, Stock and Machinery, and is to bear all expenses of realisation.
(2) Bad Debts amounted to ₹2,000; Stock realised ₹36,000 and Machinery realised ₹46,000.
There was an unrecorded asset of ₹ 10,000 which was taken over by A at ₹8,000.
(3) Market value of Investments was ascertained to be ₹20,000, and one of the creditors
agreed to accept the Investments at this value. Remaining creditors were paid at a discount
of ₹6,000.
(4) An office typewriter, not shown in the books of accounts, realised ₹20,000.
(5) There were outstanding expenses amounting to ₹6,000. These were settled for ₹4,500.
Expenses of realisation met by B amounted to ₹2,000.
Prepare necessary accounts.
[Ans. Loss on Realisation ₹83,500; C brings in ₹41,700; Final payment to A ₹63,600; and B ₹
14,600. Total of Bank A/c ₹ 1,81,700.]

Q. 26. Mala, Neela and Kala were partners sharing profits in the ratio of 3 : 2 ; 1, On 1-3-2015
their firm was dissolved. The assets were realized and liabilities were paid off. The accountant
prepared Realisation Account, Partner’s Capital Accounts and Cash Account, but forgot to
post few amounts in these accounts. t
You are required to complete these below given accounts by posting, correct amounts.
Dr. REALISATION ACCOUNT Cr.

Particulars Amount Particulars Amount

₹ ₹

To Sundry Assets : By Provision for bad debts 1,000

Machinery 10,000 By Sundry Creditors 15,000

Stock 21,000 By Sheela’s Loan 13,000

Debtors 20,000 By Repairs and Renewals Reserve 1,200

Prepaid Insurance 400 By Cash — Assets sold :

Investments 3,000 54,400 Machinery 8,000

To Mala’s Capital A/c Stock 14,000

— Sheela’s Loan 13,000 Debtors 16,000 38,000

To Cash — Creditors paid 15,000 By Mala’s Capital —- Investments 2,000

To Cash — Dishonoured bill paid 5,000 …………….. ………..

To Cash — Expenses 800

88,200 88,200

Dr. CAPITAL ACCOUNTS Cr.

Particulars Mala Neela Kala Particulars Mala Neela Kala

₹ ₹ ₹ ₹ ₹ ₹

— — — —— — — —

— — — —

To Cash 12,000 9,000 By Cash 1,000

23,000 15,000 3,000 23,000 15,000 3,000

Dr. CASH ACCOUNT Cr.

Particulars Amount Particulars Amount

₹ ₹

To Balance b/d 2,800 By Realisation A/c

To Realisation A/c — Creditors paid 15,000

— Sale of Assets 38,000 By Dishonoured bill 5,000

To Kala’s Capital A/c 1,000 ……………………. ……….

By Mala’s Capital A/c 12,000

By Neela’s Capital A/c 9,000

41,800 41,800

(C.B.S.E. 2015, All India)

[Ans. Loss on Realisation ₹ 18,000; Opening Balance of Capital Accounts : Mala ₹ 10,000,
Neela ₹ 15,000 and Kala ₹2,000.]
27 Rita and Sobha are partners in a firm, Fancy Garments Exports, sharing profits and losses
equally. On 1st April, 2023, the Balance Sheet of the firm was:

Liabilities ₹ Assets ₹

Sundry Creditors 75,000 Cash 6,000

Bills Payable 30,000 Bank 30,000

Loan by Rita 25,000 Stock 75,000

General Reserve 24,000 Book Debts 66,000

Less: Provision for Doubtful

Capital A/cs: Debts 6,000 60,000

Rita 90,000 Plant and Machinery 45,000

Sobha 30,000 1,20,000 Land and Building 48,000

Loan to Sobha 10,000

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.
(c) Sundry Creditors were paid out at a discount of 10%. Bills Payable were paid in full.
(d) Land and Building realised ₹ 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 given in settlement of 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.
[Ans.: Gain (Profit) on Realisation—₹ 1,04,500; Amount paid to Rita—₹ 1,24,250;
Sobha—₹ 94,250; Total of Bank Account—₹ 3,21,250.]
28 Arnab, Ragini and Dhrupad are partners sharing profits in the ratio of 3:1 :1. Last year,
conflicts arose due to certain issues of disagreements and on 31 st March, 2023, they decided
to dissolve the firm. On that date their Balance Sheet was as under:
BALANCE SHEET OF ARNAB, RAGINI AND DHRUPAD as at 31st March, 2023

Liabilities ₹ Assets ₹

Creditors 60,000 Bank 50,000

Arnab's Brother's Loan 95,000 Debtors 1,70,000

Less: Provision for Doubtful

Dhrupad's Loan 1,00,000 Debts 20,000 1,50,000

Investment Fluctuation
Reserve 50,000 Stock 1,50,000

Capital A/cs: Investments 2,50,000

Arnab 2,75,000 Building 3,00,000

Ragini 2,00,000 Profit & Loss Account 50,000

Dhrupad 1,70,000 6,45,000

9,50,000 9,50,000

The assets were realised and the liabilities were paid as under:
(i) Arnab agreed to pay his brother's loan.
(ii) Investments realised 20% less.
(iii) Creditors were paid at 10% less.
(iv) Building was auctioned for ₹ 3,55,000. Commission on auction was ₹ 5,000.
(v) 50% of the stock was taken over by Ragini at market price which was 20% less than the
book value and the remaining was sold at market price.
(vi) Dissolution expenses were ₹ 8,000. ₹ 3,000 were to be borne by the firm and the balance
by Dhrupad. The expenses were paid by him.
Prepare Realisation Account and Partners’ Capital Accounts.
[Ans.: Loss on Realisation—₹ 1,27,000; Final Payments: Arnab—₹ 2,63,800;
Ragini—₹ 1,04,600 and Dhrupad—₹ 1,37,600.]

Q. 29 Arun, Tarun and Varun shared profits in the ratio of 2 : 2 : 1. On 31.12.2022 their
Balance Sheet was as follows :

Liabilities ₹ Assets ₹

Creditors 50,000 Cash 30,000

Bills Payable 30,000 Debtors 50,000

Provident Fund 20,000 Stock 36,000

Investment Fluctuation Fund 8,000 Investments 20,000

Commission Received in Advance 12,000 Plant 90,000

Capitals : Profit & Loss A/c 34,000

Arun 50,000

Tarun 60,000

Varun 30,000 1,40,000

2,60,000 2,60,000

On this date the firm was dissolved. Arun was appointed to realise the assets. Arun was to
receive 5% commission on the sale of assets (except cash) and was to bear all expenses of
realisation.
Arun realised the assets as follows :
Stock ₹36,000, Debtors ₹45,000, Investments 80% of the book value, Plant ₹65,500.
Expenses of realisation amounted to ₹5,500. Commission received in advance was returned
to the customers after deducting ₹4,000. Firm had to pay ₹8,000 for outstanding wages. This
liability was not provided for in the above Balance Sheet. ₹20,000 had to be paid for provident
fund.
Prepare Realisation Account, Capital Accounts and Cash Account.
[Ans. Loss on Realisation ₹37,625; Final Payment Arun ₹29,475, Tarun ₹31,350 and Varun ₹
15,675; Total of Cash A/c ₹ 1,92,500.]
Hint. There will be no entry for the expenses of realisation, as these will be met by Arun
personally.
Q. 30. Arnab, Ragini and Dhrupad were partners sharing profits in the ratio of 3 : 1 : 1. On
31st March, 2023, they decided to dissolve their firm. On that date their Balance Sheet was
as under :
BALANCE SHEET OF ARNAB, RAGINI AND DHRUPAD
as at 31st March, 2023

Liabilities ₹ Assets ₹

Creditors 60,000 Bank 50,000

Arnab’s Brother’s Loan 95,000 Debtors 1,70,000

Dhrupad’s Loan 1,00,000 Less : Provision for

Investment Fluctuation Fund 50,000 Bad Debts 20,000 1,50,000

Capitals: Arnab 2,75,000 Stock 1,50,000

Ragini 2,00,000 Investments 2,50,000

Dhrupad 1,70,000 6,45,000 Building 3,00,000

Profit and Loss Account 50,000

9,50,000 9,50,000

The assets were realised and the liabilities were paid as under :
(i) Amab agreed to pay his brother’s loan.
(ii) Debtors realised at 30% less.
(iii) Creditors were paid at 10% less.
(iv) Building was auctioned for ₹3,55,000. Commission on auction was ₹4,000.
(v) 50% of the stock was taken over by Ragini at market price which was 20% less than the
book value and the remaining was sold at market price.
(vi) Dissolution expenses were ₹8,000. ₹3,000 were to be borne by the finn and the balance
by Dhrupad. The expenses were paid by him.
Prepare Realisation Account, Bank Account and Partner’s Capital Accounts.
[Ans. Profit on Realisation ₹43,000; Final Payment : Arnab ₹3,65,800; Ragini ₹ 1,38,600 and
Dhrupad ₹ 1,71,600; Total of Bank A/c ₹8,30,000.]
Hints. (1) Realisation of Building will be recorded at the net amount of ₹3,51,000.
(2) It will be assumed that Investments being tangible assets have realised at book value i.e.,
₹2,50,000.
Q. 31. A, B and C sharing profits and losses in the ratio of 3 : 2 : 1 agreed to dissolve their
partnership firm on 31st March, 2021. A was asked to realise the assets and pay off liabilities.
He had to bear the realisation expenses for which he was promised a lump sum amount of
₹3,000. Their financial position on that date was as follows :

Liabilities ₹ Assets ₹

Accounts Payable 40,000 Goodwill 20,000

Mortgage Loan 30,000 Lease 75,000

Advance from B 25,000 Patents 6,000

Employees’ Saving Bank 16,000 Stock 50,000

Capitals : Accounts Receivable 25,000

A 80,000 Equipment 20,000

B 66,000 1,46,000 300 Shares in A Ltd. 36,000

Cash 13,000

C’s Capital 12,000

2,57,000 2,57,000

Informations :
(1) Stock was valued at ₹40,000 and this was taken over by A and B equally. Lease realised
₹ 1,10,000; Equipments at ₹ 18,000; and Accounts Receivable at ₹20,000 and other assets
proved valueless.
(2) Actual realisation expenses paid by A amounted to ₹ 1,800.
(3) There was an unrecorded asset of ₹ 10,000 which was taken over by A at
₹ 12,000.
(4) A bill of ₹3,200 due for sales tax was received during the course of realisation and this was
also paid.
(5) Sunil, an old customer whose account was written off as bad in the previous year, paid
₹2,500 which is not included in the above stated accounts receivable.
(6) Market value of the Shares in X Ltd. is ₹ 100 per share. Half the shares were sold in the
market subject to a commission of 2% and the balance half were divided by all the partners in
their profit sharing ratio.
Prepare necessary accounts.
[Ans. Loss on Realisation ₹6,000; Cash brought in by C ₹ 15,500; Payment to A ₹40,500 and
B ₹39,000; Total of Cash A/c ₹ 1,93,700.]

Hints : 1. Cash realised from sale of shares : ₹

150 Shares @ ₹ 100 each = 15,000

Less 2% of 15,000 = 300

14,700

2. No entry need to be passed for realisation expenses of ₹ 1,800 paid by A.

Only the following entry may be passed for ₹3,000 promised to be paid to A :

Realisation A/c Dr. 3,000

To A’s Capital A/c 3,000

3. Accounts Payable, Mortgage Loan, Advance from B and Employees’ Saving Bank will be
paid in full.
Q. 32 X Y and Z decided to dissolve partnership. The position as at 31st December, 2021,
the date of dissolution was as follows :

Liabilities ₹ Assets ₹

Creditors 20,000 Freehold Property 40,000

Bank Loan 5,000 Machinery 40,000

Capitals : X 70,000 Investments 16,000

Y 40,000 Stock 30,000

Z 20,000 1,30,000 Debtors 30,000

Current Accounts : Cash 10,000

X 12,000 Loss in Business 20,000

Y 7,500 19,500 Current Account : Z 4,500

Reserve for Contingency 10,000

Commission Received in Advance 6,000

1,90,500 1,90,500

They shared profits in the ratio of X : 1/2, Y : 3/10 and Z : 1/5.

X agreed to bear all realisation expenses. For this service Ais paid ₹2,000. Actual expenses
amounted to ₹3,200 which was withdrawn by him from the firm.
Other informations are :
(1) Assets, with the exception of investments and Cash, are sold for ₹ 1,25,100. 75% of the
investments are taken over by X at 75% of their book value. He also agrees to discharge the
Bank Loan. The remaining investments were taken over by Y at the market value of 120%.
(2) There were outstanding expenses amounting to ₹5,000. These were settled for ₹2,000.
(3) A B/R for ₹ 10,000 was received from a customer Mr. Surender Kumar and the bill was
discounted from the bank. Surender became insolvent and 75 paise per ₹ were received from
his estate.
(4) Commission received in advance was returned to the customers after deducting 60% for
work done.
You are required to prepare the necessary accounts.
[Ans. Loss on Realisation ₹20,000; Final Payment to A ₹61,800; Y ₹33,700 and Z ₹9,500;
Total of Cash A/c ₹ 1,42,600.]
Hints : 1. Following entries will be passed for realisation expenses :
(i) Realisation A/c Dr. 2,000
To X’s Capital A/c 2,000
X’s Capital A/c Dr. 3,200
To Cash A/c 3,200
2. Following entry may be passed for the payment on account of B/R discounted
(i) Cash A/c Dr. 7,500
To Realisation A/c 7,500
(ii) Realisation A/c Dr. 10,000
To Cash A/c 10,000
Q. 33 A and B shared profits in the ratio of 7 : 3. They dissolved the partnership and appointed
A to realise the assets. A is to receive 6% commission on the amount realised from Stock,
Debtors, B/R and Shares.
The position of the firm was as follows :

Liabilities ₹ Assets ₹

Creditors 60,000 Plant and Machinery 20,000

Repairs and Renewals Reserve 4,000 Prepaid Insurance 1,200

Bank Loan 20,000 Stock 60,000

A’s Capital A/c 50,000 100 Shares in D.C.M. Ltd 5,000

B's Capital A/c 20,000 Sundry Debtors 38,000

B/R 6,000

Cash at Bank 8,800

A’s Drawings 5,000

Advertisement Suspense A/c 10,000

1,54,000 1,54,000

Informations :
1. A realised the assets as follows :— Full amount from Sundry Debtors and B/R except from
one for ₹2,000 being insolvent. Stock realised ₹52,000; Shares in. D.C.M. were sold for ₹60
each.
2. Half the trade creditors accepted plant and machinery at an agreed valuation of 10% less
than the book value and cash of ₹7,000 in full settlement of their claims.
3. Remaining creditors were paid off at a discount of 10%. Expenses of realisation amounted
to ₹700.
4. One quarter’s tax amounting to ₹ 1,500 was due and had to be paid.
5. There was a contingent liability amounting to ₹ 13,000. It was settled for ₹6,000.
6. Bank Loan was discharged along with interest due for two months @ 18% p.a.
Prepare necessary accounts.
[Ans. Loss on Realisation ₹ 15,000; Amount paid to A ₹33,500 and to B ₹ 12,500; Total of
Bank A/c ₹1,08,800.]
Hints : (1) Creditors for ₹30,000 accept Plant and Machinery at ₹18,000 and Cash ₹7,000.
The balance of ₹5,000 will be treated as discount. Remaining Creditors of ₹30,000 are paid
₹27,000 in full settlement. Hence, the total Cash paid to Creditors = ₹7,000 + ₹27,000 =
₹34,000.
(2) Commission paid to A (For sale of assets) 6% on ₹ 1,00,000 = ₹6,000.
(3) Repairs and Renewals Reserve will be transferred to the Credit side of Realisation A/c and
no further entry will be made in respect thereof.
Q. 34 E, F and G were partners in a firm sharing profits in the ratio of 2 : 2 : 1. On March
31,2017, their firm was dissolved. On the date of dissolution, the Balance Sheet of the firm
was as follows:
BALANCE SHEET
as at March 31, 2017

Liabilities Amount Assets Amount

₹ ₹

Capitals : G’s Capital 500

E 1,30,000 Profit & Loss Account 10,000

F 1,00,000 2,30,000 Land & Building 1,00,000

Creditors 45,000 Furniture 50,000

Outstanding Expenses 17,000 Machinery 90,000

Debtors 36,500

Bank 5,000

2,92,000 2,92,000

F was appointed to undertake the process of dissolution for which he was allowed a
remuneration of ₹5,000. F agreed to bear the dissolution expenses. Assets realized as follows:
(i) The Land & Building was sold for ₹ 1,08,900.
(ii) Furniture was sold at 25% of book value.
(iii) Machinery was sold as scrap for ₹9,000.
(iv) All Debtors were realised at full value.
Creditors were payable on an average of 3 months from the date of dissolution. On discharging
the Creditors on the date of dissolution, they allowed a discount of 5%. Pass necessary
Journal entries for dissolution in the books of the firm.
(C.B.S.E. Sample Paper, 2018)
[Ans. Loss on Realisation ₹ 1,12,350; Net amount received from G ₹24,970 and Final Payment
made to E ₹81,060 and F ₹56,060.]
Hint : Payment made to creditors ₹42,750.
Q. 35 A, B and C shared profits in the ratio of 1 : 2 : 2. Following is their Balance Sheet on the
date of dissolution :
Liabilities ₹ Assets ₹
Sundry Creditors 2,50,000 Cash at Bank 25,000
Bills Payable 25,000 Debtors 4,00,000
Workmen Compensation Reserve 30,000 Less : Provision for
A’s Loan 1,00,000 Doubtful
Capital Accounts : Debts 20,000 3,80,000
A 3,00,000 Stock 20,000
B 5,00,000 8,00,000 Machinery 3,00,000
Land & Buildings 4,00,000
Advertisement Suspense Account 30,000
Capital Account: C 50,000
12,05,000 12,05,000
Informations :
(i) Land & Buildings were sold at 80% of the book value.
(ii) Stock was given to bills payable in foil settlement.
(iii) Sundry creditors accepted machinery and paid ₹ 10,000 to the firm.
(iv) Debtors were all good.
(v) An unrecorded asset estimated at ₹60,000 was taken over by partner B at ₹50,000.
(vi) Firm had to pay ₹40,000 as Workmen Compensation.
(vii) A’s Loan was settled by giving him an unrecorded asset of ₹75,000 at ₹60,000 and the
balance in cash.
(viii) Partner A is to be paid remuneration of ₹20,000 for dissolution work. Realisation
expenses of ₹15,000 were paid by the firm.
Prepare necessary accounts.
[Ans. Loss on Realisation ₹30,000; C brings in ₹74,000; Final Payment to A ₹3,08,000 and B
₹4,26,000; Total of Bank Account ₹8,29,000.]
Hint : Entry for settlement of A’s Loan :

A’s Loan A/c Dr. 1,00,000

To Bank A/c 40,000

To Realisation A/c 60,000

Q. 36 Susan, Geeta and Rashi are partners sharing profits and losses in the ratio of 5 : 3 : 2.
Their Balance Sheet as at 31st March, 2017, is as under :
BALANCE SHEET OF SUSAN, GEETA AND RASHI
as at 31st March, 2017

Liabilities Amount Assets Amount

₹ ₹

Sundry Creditors 50,000 Cash at Bank 70,000

Workmen Compensation Reserve 25,000 Sundry Debtors 65,000

Employees Providend Fund 5,000 Less : Provision for

Bank Loan 55,000 Doubtful Debts (5,000) 60,000

Capital A/cs Goodwill 50,000

Susan 2,20,000 Furniture 1,00,000

Geeta 1,70,000 Building 3,80,000

Rashi 1,35,000 5,25,000

6,60,000 6,60,000

The partners decided to dissolve their partnership on 31st March, 2017.

The following transactions took place at the time of dissolution :
(a) Realization expenses of ₹2,000 were paid by Susan on behalf of the firm.
(b) Geeta took over the goodwill for her own business at ₹40,000.
(c) Building was taken over by Rashi at ₹3,00,000.
(d) Only 80% of the debtors paid their dues.
(e) Furniture was sold for ₹97,000.
(f) Bank Loan was settled along with interest of ₹5,000.
You are required to prepare the Realization Account. (I.S.C. 2018)
[Ans. Loss on Realisation ₹ 1,08,000.]
37. Yogesh and Naresh were partners sharing profits equally. They dissolved the firm on 1st
April, 2023. 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 ₹
Creditors 40,000 Cash/Bank 6,000
Bills Payable 40,000 Investments 30,000
Loan by Naresh 44,000 Debtors 40,000
Loan by Mrs. Yogesh 42,000 Less: Provision for Doubtful 4,000 36,000
Debts
Investment Fluctuation Bills Receivable 33,400
Reserve 8,000
Advertisement Suspense
Capital A/cs: A/c 1,10,600
Yogesh 21,000
Naresh 21,000 42,000
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.
[Ans.: Realisation Gain—₹ 13,330; Final Payment to Yogesh—₹ 14,365; Naresh—Nil;
Loan of Naresh transferred to Naresh's Capital A/c—₹ 43,635; Repayment of Loan—₹ 365.]
38. Bale and Yale are equal partners of a firm. They decide to dissolve their partnership on 31
st March, 2023 at which date their Balance Sheet stood as:

Liabilities ₹ Assets ₹

Capital A/cs: Building 45,000

Bale 50,000 Machinery 15,000

Yale 40,000 90,000 Furniture 12,000

General Reserve 8,000 Debtors 8,000

Loan by Bale 3,000 Stock 24,000

Creditors 14,000 Bank 11,000

 1,15,000 1,15,000

(a) The assets realised were:

Stock ₹ 22,000; Debtors ₹ 7,500; Machinery ₹ 16,000; Building ₹ 35,000.
(b) Yale took Furniture at ₹ 9,000.
(c) Bale agreed to accept ₹ 2,500 in settlement of his Loan Account.
(d) Dissolution Expenses were ₹ 2,500.
Prepare the:
(i) Realisation Account; (ii) Capital Accounts of Partners;
(iii) Loan by Bale Account; (iv) Bank Account.
[Ans.: Loss on Realisation—₹ 16,500; Amount Paid to Bale—₹ 45,750; Yale—₹ 26,750;
Total of Bank Account—₹ 91,500.]

JOURNAL
1. Land and Building (Book Value) ₹ 1,60,000 sold for ₹ 3,00,000 through a broker who
charged 2% commission on the deal. Journalise the transaction, at the time of dissolution of
the firm. (CBSE Sample Paper 2018)
2. (a) Pass the Journal entry when an unrecorded liability of ₹ 15,000 is settled at ₹ 10,000
and paid by X, a partner on the dissolution of a firm?
(b) What Journal entry will be passed when a machine having a book value o f₹ 15,000 is
given to Rakesh, a creditor of ₹ 22,000 at an agreed value of ₹ 12,000 towards part payment
of his dues₹
[Ans.: (a) Dr. Realisation A/c and Cr. X's Capital A/c by ₹ 10,000.
(b) Dr. Realisation A/c and Cr. Cash/Bank A/c by ₹ 10,000.]
3. Pass Journal entries in the following cases?
(a) Expenses of realisation ₹ 600 to be borne by the firm and are paid by Mohan, a partner.
(b) Mohan, one of the partners of the firm, was asked to carryout dissolution of the firm for
which he was allowed a salary of ₹ 2,000.
(c) Motor car of book value₹ 50,000 taken by a creditor of the book value of ₹ 40,000 in
settlement.
[Hint: (c) No entry will be passed for recorded asset taken by creditor.]
4. Pass Journal entries for the following:
(a) Realisation expenses of ₹ 10,000 were to be borne by Mohan, a partner, but were paid by
the firm.
(b) Mahesh, a partner, was paid remuneration of ₹ 25,000 and he was to meet all expenses.
(c) Suresh, a partner, was paid remuneration of ₹ 20,000 and he was to meet all expenses.
Firm paid an expense of ₹ 5,000.
5. Pass Journal entries for the following:
(a) Realisation expenses were₹ 10,000 and paid by the firm on behalf of Alok, a partner, with
whom it was agreed at₹ 7,500.
(b) Realisation expenses were ₹ 5,000. It was agreed that the firm will bear ₹ 2,000 and
balance by Ravinder, a partner.
(c) Dissolution expenses of ₹ 10,000 were paid by Amit, a partner, on behalf of the firm.
6. Pass necessary Journal entries in the following cases:
(a) Creditors of ₹ 85,000 accepted ₹ 40,000 as cash and Investment of ₹43,000, in full
settlement of their claim.
(b) Creditors were ₹ 16,000. They accepted Machinery valued at₹ 18,000 in settlement of their
claim.
(c) Creditors were₹ 90,000. They accepted Building valued at ₹ 1,20,000 and paid cash to the
firm ₹ 30,000. (NCERT)
[Hints: (a) Dr. Realisation A/c and Cr. Cash A/c by ₹ 40,000.
(b) No Entry.
(c) Dr. Cash A/c and Cr. Realisation A/c by ₹ 30,000.]
7. Charu, Dhwani, Iknoor and Paavni were partners in a firm. They had entered into
partnership firm last year only, through a verbal agreement. They contributed Capitals in the
firm and to meet other financial requirements, few partners also provided loan to the firm.
Within a year, their conflicts arisen due to certain disagreements and they decided to dissolve
the firm.The firm had appointed Ms. Kavya, who is a financial advisor and legal consultant, to
carry on the dissolution process. In the first instance, Ms. Kavya had transferred various assets
and external liabilities to Realisation Account. Due to her busy schedule; Ms. Kavya has
delegated this assignment to you, being an intern in her firm. On the date of dissolution, you
have observed the following transactions:
(i) Dhwani's Loan of ₹ 50,000 to the firm was settled by paying ₹ 42,000.
(ii) Paavni's Loan of ₹ 40,000 was settled by giving an unrecorded asset of ₹ 45,000.
(iii) Loan to Charu of ₹ 60,000 was settled by payment to Charu's brother loan of the same
amount.
(iv) Iknoor's Loan of ₹ 80,000 to the firm and she took over Machinery of ₹ 60,000 as part
payment.
You are required to pass necessary entries for all the above mentioned transactions.
(CBSE Sample Paper 2023)
8. 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.
[Hint: (h) Realisation Account will be debited by ₹ 7,500.]
9. The firm of Manjeet, Sujeet and Jagjeet was dissolved on 31st March, 2018. It was agreed
that Sujeet will take care of the dissolution related activities and will get 10% of the value of
assets realised. Sujeet agreed to bear the realisation expenses. Assets realised ₹ 10,00,750
and realisation expenses were ₹ 90,000, which were paid from the firm's cash. ₹ 4,50,000
were paid to the creditors in full settlement of their claim. Pass necessary Journal entries for
the above transactions in the books of the firm. (CBSE2019)
[Hints: (i) Dr. Bank A/c and Cr. Realisation A/c by ₹ 10,00,750.
(ii) Dr. Realisation A/c and Cr. Sujeet's Capital A/c by ₹ 1,00,075.
(iii) Dr. Sujeet's Capital A/c and Cr. Bank A/c by ₹ 90,000.
(iv) Dr. Realisation A/c and Cr. Bank A/c by ₹ 4,50,000.]
10. Nisha, Kamal and Vijay had an automobile spare parts business. Due to strained
relationship among the partners, they were unable to take collective decisions for the growth
of business. As a result, firm has been in losses for the last 3 years. The partners decided to
dissolve the firm.
Following transactions took place at the time of dissolution:
(i) Shiv, a creditor, to whom ₹ 6,000 were due, accepted office equipment at ₹ 4,000 and the
balance was paid to him.
(ii) Investment, which appeared in the books at ₹ 1,00,000, half of it is taken by Mohan, a
creditor, at 10% above the book value in settlement of his claim and the remaining half was
sold in the market at a loss of 30%.
(iii) Loan of ₹ 50,000 advanced by Nisha to the firm was returned.
(iv) Loss on realisation ₹ 30,000 was distributed among the partners equally.
Journalise the above transactions at the time of dissolution of the firm.
11. 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 718,000. He was paid 717,000 in full settlement of his
loan.
(d) Investments were ₹ 53,000 out of which investments of ₹ 43,000 were taken 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.
(CBSE 2020)
[Hints: (a) Dr. Bank/Cash A/c and Cr. Realisation A/c by ₹ 88,000.
(b) Dr. Realisation A/c and Cr. Bank A/c by ₹ 50,000 each.
(c) Dr. Raja's Loan A/c by ₹ 18,000; Cr. Bank/Cash A/c by ₹ 17,000 and Realisation A/c by ₹
1,000. Alternatively:
(i) Dr. Raja's Loan A/c and Cr. Bank/Cash A/c by ₹ 17,000 each.
(ii) Dr. Raja's Loan A/c and Cr. Realisation A/c by ₹ 1,000 each.
(d) Dr. Simar's Capital A/c by 752,000and Cash/Bank A/c by ₹ 12,000; Cr. Realisation A/c by
₹ 64,000.
(e) Dr. Realisation A/c and Cr. Cash/Bank A/c by ₹ 19,000 each.
(f) Dr. Realisation A/c by ₹ 30,000; Cr. Simar's Capital A/c by ₹ 12,000; Raja's Capital A/c by
₹ 12,000 and Rita's Capital A/c by ₹ 6,000.]
12. Pass necessary Journal entries to record the following unrecorded assets and liabilities in
the books of Paras and Priya:
(a) There was an old furniture in the firm which had been written off completely in the books.
This was sold for ₹ 3,000.
(b) Ashish, an old customer whose account for ₹ 1,000 was written off as bad in the previous
year, paid 60%, of the amount.
(c) Paras agreed to takeover the firm’s goodwill (not recorded in the books of the firm), at a
valuation of ₹ 30,000.
(d) There was an old typewriter which had been written off completely from the books. It was
estimated to realise ₹ 400. It was taken by Priya at an estimated price less 25%.
(e) There were 100 shares of ₹ 10 each in Star Limited acquired at a cost of₹ 2,000 which had
been written- off completely from the books. These shares are valued @₹6each and divided
among the partners in their profit-sharing ratio. (NCERT)
[Hints: (a) Dr. Cash/Bank A/c and Cr. Realisation A/c by ₹ 3,000.
(b) Dr. Cash/Bank A/c and Cr. Realisation A/c by ₹ 600.
(c) Dr. Paras's Capital A/c and Cr. Realisation A/c by ₹ 30,000.
(d) Dr. Priya's Capital A/c and Cr. Realisation A/c by ₹ 300.
(e) Dr. Paras's Capital A/c and Priya's Capita! A/c by ₹ 300 each;
Cr. Realisation A/c by ₹ 600.]
13. 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.
(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.
[Hint: Balance furniture of₹ 25,000 will be realised at book value being tangible asset.]
14. 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 of ₹ 10,000 were given a piece of
furniture of book value ₹ 8,000 out of total furniture of book value ₹ 28,000 in 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 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.
[Hints: (b) (i) Dr. Bank A/c and Credit Realisation A/c by ₹ 20,000.
(ii) Dr. Realisation A/c and Cr. Bank A/c by ₹ 27,000.
(f) Dr. Realisation A/c and Cr. Sarthak's Capital A/c by ₹ 15,000.]
15. Suman and Rajan were partners in a firm sharing profits and losses in the ratio of 3 : 1.
The firm was dissolved on 31st March, 2019. Pass the necessary Journal entries for the
following transactions after various assets (other than cash in hand and at bank) and third
party liabilities have been transferred to Realisation Account:
(a) Dissolution expenses ₹ 10,000 were paid by the firm.
(b) Rajan had given a loan of ₹ 60,000 to the firm for which he accepted ₹ 58,000 in full
settlement.
(c) The firm had a debit balance of ₹ 40,000 in the Profit & Loss Account on the date of
dissolution.
(d) Profit on realisation was₹ 12,000. (CBSE 2020 C)
[Hints: (a) Dr. Realisation A/c and Cr. Cash/Bank A/c by ₹ 10,000.
(b) Dr. Rajan's Loan A/c by ₹ 60,000 and Cr. Bank/Cash A/c by ₹ 58,000 and Realisation A/c
by ₹ 2,000.
(c) Dr. Suman's Capital A/c by ₹ 30,000 and Rajan's Capital A/c by ₹ 10,000;
Cr. Profit & Loss A/c by ₹ 40,000.
(d) Dr. Realisation A/c by ₹ 12,000; Cr. Suman's Capital A/c by ₹ 9,000 and Rajan's Capital
A/c by ₹ 3,000.]
16. Neeraj, Dheeraj and Sheeraj were partners in a firm since 2015. Due to some personal
financial needs and constant disagreements among them, they decided to dissolve the firm.
Vijay, a financial and legal consultant has been appointed to carry out the dissolution process.
He opened Realisation Account and transferred all the recorded assets (including goodwill
except the fictitious assets, cash and bank balances) to the debit of Realisation Account and
outsiders' liabilities to the credit of Realisation Account. He observed the following
transactions:
(i) There was an old computer which had been written off from the books. It was estimated to
realise ₹ 8,000. It was taken by Neeraj (Partner), at the estimated price less 25%.
(ii) A disputed claim of₹ 50,000 of a worker for compensation which remained unrecorded in
the books was finally settled at ₹ 30,000.
(iii) Dheeraj paid ₹ 60,000 for using the name of the firm.
(iv) There was an unrecorded asset of ₹ 60,000, half of which was sold for ₹ 30,000 and the
remaining half was taken by Sheeraj (partner) for ₹ 25,000.
Pass necessary Journal entries for the above transactions in the books of the firm.
17. Lai and Pal were partners in a firm sharing profits in the ratio of 3:7. On 1 st April, 2015,
their firm was dissolved. After transferring assets (other than cash) and outsider's liabilities to
Realisation Account, you are given the following information:
(a) A creditor of ₹ 3,60,000 accepted machinery valued at ₹ 5,00,000 and paid to the firm ₹
1,40,000.
(b) A second creditor for ₹ 50,000 accepted stock at ₹ 45,000 in full settlement of his claim.
(c) A third creditor amounting to ₹ 90,000 accepted ₹ 45,000 in cash and investments worth ₹
43,000 in full settlement of his claim.
(d) Loss on dissolution was₹ 15,000.
Pass necessary Journal entries for the above transactions in the books of firm assuming that
all payments were made by cheque. (A!20)6)
[Hints: (a) Dr. Bank A/c and Cr. Realisation A/c by ₹ 1,40,000. (b) No entry.]
18. Pass Journal entries for payment of following unrecorded liabilities on the dissolution of a
firm of partners Shiv and Mohan:
(a) There was a contingent liability in respect of bills discounted but not matured of ₹ 18,500.
An acceptor of one bill of ₹ 2,500 became insolvent and fifty paise in a rupee was recovered.
The liability of the firm on account of this bill discounted and dishonoured has not so far been
recorded.
(b) There was a contingent liability in respect of a claim for damages for ₹ 75,000, such liability
was settled for ₹ 50,000 and paid by the partner Shiv.
(c) Firm will have to pay ₹ 10,000 as compensation to an injured employee, which was a
contingent liability not accepted by the firm.
(d) ₹ 5,000 for damages claimed by a customer has been disputed by the firm. It was settled
at 70% by a compromise between the customer and the firm.
[Hints: (a) (i) Dr. Realisation A/c and Cr. Bank A/c by ₹ 2,500.
(ii) Dr. Bank A/c and Cr. Realisation A/c by ₹ 1,250.
(b) Dr. Realisation A/c and Cr. Shiv's Capital A/c by ₹ 50,000.
(c) Dr. Realisation A/c and Cr. Bank A/c by ₹ 10,000.
(d) Dr. Realisation A/c and Cr. Bank A/c by ₹ 3,500.]
19. Pass the Journal entries for the following transactions on the dissolution of the firm of P
and Q after assets
(other than cash) and outside liabilities have been transferred to Realisation Account:
(a) Stock ₹ 2,00,000. 'P‘ took 50% of stock at a discount of 10%. Balance stock was sold at a
profit of 25% on cost.
(b) Debtors ₹ 2,25,000. Provision for Doubtful Debts ₹ 25,000. ₹ 20,000 of the book debts
proved bad.
(c) Land and Building (Book value ₹ 12,50,000) sold for ₹ 15,00,000 through a broker who
charged 2% commission.
(d) Machinery (Book value ₹ 6,00,000) was handed over to a creditor at a discount of 10%.
(e) Investment (Book value ₹ 60,000) realised at 125%.
(f) Goodwill of ₹ 75,000 and prepaid fire insurance of ₹ 10,000.
(g) Trade creditors ₹ 1,60,000. Half of the trade creditors accepted Plant and Machinery at an
agreed valuation of ₹ 54,000 and cash in full settlement of their claims after allowing a discount
of ₹ 16,000. Remaining trade creditors were paid 90% in final settlement.
[Hints: (f) For Goodwill, no Journal entry will be passed because its realised value is not given.
For prepaid fire insurance, no Journal entry because it is not realised.
(g) (i) Dr. Realisation A/c and Cr. Bank A/c by ₹ 10,000.
(ii) Dr. Realisation A/c and Cr. Bank A/c by ₹ 72,000.]
20. 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.
(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. (Delhi 2017)
[Hints: (a) Dr. Realisation A/c and Cr. Dharam’s Capital A/c by ₹ 12,000.
(b) (i) Dr. Realisation A/c and Cr. Jay's Capital A/c by ₹ 15,000.
(ii) Dr. Jay's Capital A/c and Cr. Vijay's Capital A/c by ₹ 16,000.
(c) (i) Dr. Realisation A/c and Cr. Deepa's Capital A/c by ₹ 7,000.
(ii) Dr. Deepa's Capital A/c and Cr. Bank A/c by ₹ 6,000.
(d) (i) Dr. Realisation A/c and Cr. Dev's Capital A/c by ₹ 7,500.
(ii) Dr. Dev's Capital A/c and Cr. Realisation A/c by ₹ 7,500.
Or
No Entry.
(e) (i) Dr. Realisation A/c and Cr. Jeev's Capital A/c by ₹ 10,000.
(ii) Dr. Jeev's Capital A/c and Cr. Cash A/c by ₹ 12,000.
(f) No Entry.]
Q. 21. Adiraj and Karan were partners in a firm sharing profits and losses in the ratio 3 : 2. On
31st March, 2018 the firm was dissolved. After the transfer of assets (other than cash in hand
and at bank) and third party liabilities to the Realisation Account, the following information was
provided :
(i) Furniture of ₹70,000 was sold for ₹68,000 by auction and auctioneer’s commission
amounted to ₹2,000.
(ii) Adiraj’s loan amounting to ₹35,000 was settled at ₹37,500.
(iii) Out of the stock of ₹80,000, Karan took over 50% of the stock at a discount of 20% while
the remaining stock was sold off at a profit of 30% on cost.
(iv) A bills receivable of ₹3,000 under discount was dishonoured as the acceptor had become
insolvent and hence the bill had to be met by the firm.
(v) Profit and Loss Account showed a debit balance of ₹56,000.
(vi) Realization expenses amounted to ₹2,000 which were paid by Adiraj.
Pass the necessary journal entries for the above transactions on the dissolution of the firm.
(C.B.S.E. 2019, Chennai)
[Ans. (i) Debit Bank A/c and Credit Realisation A/c by ₹66,000.
(ii) Debit Adiraj’s Loan A/c by ₹35,000 and Realisation A/c by ₹2,500 and Credit Bank A/c by
₹37,500.
(iii) Debit Karan’s Capita) A/c by ₹32,000 and Bank A/c by ₹52,000 and Credit Realisation A/c
by ₹84,000.
(iv) Debit Realisation A/c and Credit Bank A/c by ₹3,000.
(v) Debit Partners Capital A/cs by ₹33,600 and ₹22,400 and Credit P&L A/c by ₹56,000.
(vi) Debit Realisation A/c and Credit Adiraj’s Capital A/c by ₹2,000.]
Q. 22. Give the necessary journal entries for the following transactions on dissolution of the
firm of Aman and Rajat on 31st March, 2016, after the transfer of various assets (other than
cash) and the third party liabilities to Realisation Account. They shared profits and losses in
the ratio of 2 : 1.
(a) There was a bill of exchange of ₹ 10,000 under discount. The bill was received from Derek
who became insolvent.
(b) Bills Payable of ₹30,000 falling due on 30th April, 2016 was discharged at ₹29,550.
(c) Creditors of ₹30,000 took over stock of ₹ 10,000 at \0% discount and the balance was paid
to them in cash.
(d) There was an old typewriter which had been written off completely. It wras estimated to
realize ₹600. It was taken away by Rajat at 25% less than the estimated price.
(e) Aman agreed to take over the responsibility of completing dissolution at an agreed
remuneration of ₹ 1,000 and to bear all realization expenses. Actual realisation expenses ₹800
were paid by the firm.
(f) Loss on realization was ₹54,000. (C.B.S.E. 2017, Comptt. Delhi)
[Ans. (a) (b) & (c) : Debit Realisation A/c and Credit Bank A/c.
(d) Debit Rajat’s Capital A/c and Credit Realisation A/c.
(e) Debit Realisation A/c by ₹ 1,000; Credit Bank A/c by ₹800 and Aman’s Capital A/c by ₹200.
(f) Debit Aman's Capital A/c by ₹36,000 and Rajat’s Capital A/c by ₹ 18,000; Credit Realisation
A/c by ₹54,000.]
Q. 23. Disha, Mohit and Nandan are partners. They decide to dissolve their firm. Pass
necessary Journal Entries for the following after various Assets (other than Cash and Bank)
and the third party liabilities have been transferred to Realisation Account:
(a) An old typewriter which was not recorded in the books was sold for ₹2,000 whereas its
expected value was ₹5,000.
(b) Stock of ₹70,000 was taken by Disha at a discount of 30%.
(c) Total creditors of the finn were ₹20,000. A creditor for ₹2,000 was untraceable and other
creditors accepted payment allowing 10% discount.
(d) Mohit paid realisation expenses of ₹ 18,000 out of his private funds, who was to get
remuneration of ₹ 13,000 for completing the dissolution process and was responsible to bear
all the realisation expenses.
(e) Nandan had taken a loan of ₹50,000 from the firm, which was paid fully by him to the firm.
(f) ₹ 12,000 was recovered from a debtor which was written off as Bad debts last year.
[Ans. (a) Debit Bank A/c and Credit Realisation A/c by ₹2,000.
(b) Debit Disha’s Capital A/c and Credit Realisation A/c by ₹49,000.
(c) Debit Realisation A/c and Credit Bank A/c by ₹ 16,200.
(d) Debit Realisation A/c and Credit Mohit’s Capital A/c by ₹ 13,000.
(e) Debit Bank A/c and Credit Nandan’s Loan A/c by ₹50,000.
(f) Debit Bank A/c and Credit Realisation A/c by ₹ 12,000.]
Q. 24. Angad, Raman and Harshit were 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 liabilities have been transferred to Realisation Account :
(i) There was a stock of ₹90,000. Raman took over 50% of the stock at 10% discount and
remaining stock was sold at 40% profit on book value.
(ii) Profit and Loss A/c was showing a debit balance of ₹ 15,000 which was distributed among
the partners.
(iii) A machinery which was not recorded in the books was sold for ₹2,000.
(iv) Angad was paid only ₹5,000 (in full settlement) for his loan to the firm which amounted to
₹5,500.
(v) Realisation expenses amounting to ₹5,000 paid by Harshit.
(vi) There were 100 shares of ₹ 10 each in DCM Ltd. acquired at a cost of ₹ 1,200 which had
been written off completely from the books. These shares are valued at ₹9 each and divided
among the partners in their profit sharing ratio.
[Ans. (i) Debit Raman’s Capital A/c by ₹40,500 and Bank A/c by ₹63,000 and Credit
Realisation A/c by ₹ 1,03,500.
(ii) Debit Partner’s Capital A/cs by ₹5,000 each and credit Profit & Loss Account by ₹ 15,000.
(iii) Debit Bank A/c and Credit Realisation A/c by ₹2,000.
(iv) Debit Angad’s Loan A/c by ₹5,500 and Credit Bank A/c by ₹5,000 and Realisation A/c by
₹500.
(v) Debit Realisation A/c and Credit Harshit’s Capital A/c by ₹5,000.
(vi) Debit Partner’s Capital A/cs by ₹300 each and Credit Realisation A/c by ₹900.]
Q. 25. If total assets are ₹12,00,000; total liabilities are ₹3,00,000; assets are realised at 70%
and expenses on realisation are ₹ 10,000, what will be the profit or loss on realisation?
[Ans. Loss on Realisation ₹3,70,000.]
Q. 26. In a firm’s Balance Sheet, Total Debtors were appearing at ₹5,00,000 and provision for
doubtful debts appeared at ₹ 10,000. On dissolution, bad debts were ₹ 1,00,000 and the
remaining debtors were realised at 10% discount. How much amount was realised from
debtors?
[Ans. ₹3,60,000.]
Q. 27. X and Y are partners. They decided to dissolve their firm. Pass necessary entries
assuming that various assets and external liabilities have been transferred to Realisation
Account:
(1) TTs loan was appearing on the liabilities side of Balance Sheet at ₹40,000. He accepted
an unrecorded asset of ₹60,000 in full settlement of his account.
(2) Raman, a Creditor to whom ₹25,000 were due to be paid, accepted an unrecorded
computer of ₹ 18,000 at a discount of 10% and the balance was paid to him in Cash.
(3) Sudhir, an unrecorded creditor of ₹40,000 accepted an unrecorded vehicle of ₹20,000 at
₹25,000 and the balance was paid to him in Cash.
(4) There was a Contingent liability in respect of bill discounted but not matured ₹20,000.
(5) Furniture of ₹20,000 and goodwill of ₹30,000 were appearing in the Balance Sheet but no
other information was provided regarding these two items.
[Ans.
(1) Debit 2fs Loan A/c and Credit Realisation A/c by ₹40,000.
(2) Debit Realisation A/c and Credit Bank A/c by ₹8,800
(3) Debit Realisation A/c and Credit Bank A/c by ₹ 15,000
(4) No entry.
(5) Debit Bank A/c and Credit Realisation A/c by ₹20,000 Note : Intangible Asset i.e.. Goodwill
realised no value.
Q. 28 P and Q share profits and losses in 5 : 3. What Journal entries would be passed for the
following transactions on the dissolution of their firm, after various assets (other than cash)
and third party liabilities have been transferred to Realisation Account?
(i) Profit and Loss Account (Dr. Balance) appeared in the books at ₹30,000.
(ii) P was asked to look into the dissolution of the firm for which he was allowed a commission
of ₹2,500.
(iii) Q took over part of the stock at ₹6,400 (being 20% less than the book value).
(iv) An unrecorded liability amounting to ₹ 10,000 was settled at ₹8,000.
(v) Motor Car of the book value of ₹80,000 taken over by Creditors of the book value of
₹60,000 in full settlement.
[Ans. (i) Debit Partner’s Capital A/cs in profit sharing ratio and Credit Profit & Loss A/c.
(ii) Debit Realisation A/c and Credit P’s Capital A/c.
(iii) Debit Q's Capital A/c and Credit Realisation A/c by ₹6,400.
(iv) Debit Realisation A/c and Credit Bank A/c by ₹8,000.
(v) No entry for asset taken over by Creditors.
Q. 29. Ravi and Mukesh were partners in a firm sharing profit and losses equally. On 31st
March, 2019 their firm was dissolved. On the date of dissolution their Balance Sheet showed
stock of ₹60,000 and creditors of ₹70,000. After transferring stock and creditors to realisation
account the following transactions took place :
(i) Ravi took over 40% of total stock at 20% discount.
(ii) 30% of total stock was taken over by creditors of ₹20,000 in full settlement. (iii) Remaining
stock was sold for cash at a profit of 25%.
(iv) Remaining creditors were paid in cash at a discount of 10%.
Pass necessary journal entries for the above transactions in the books of the firm.
(C.B.S.E. 2019, Comptt.)
[Ans. (i) Debit Ravi’s Capital A/c and Credit Realisation A/c by ₹ 19,200.
(ii) No Entry.
(iii) Debit Cash A/c and Credit Realisation A/c by ₹22,500.
(iv) Debit Realisation A/c and Credit Cash A/c by ₹45,000.]
Q. 30 Vasudha and Dewan were partners in a firm sharing profits and losses in the ratio of 2
: 3. The firm was dissolved on 31st March, 2019. After transfer of assets (Other than cash)
and external liabilities to Realization Account, the following transactions took place :
1. Investments of the face value of ₹60,000 were sold in the open market for ₹63,000 for which
a commission of ₹700 was paid to the broker.
2. Creditors worth ₹65,000 were settled by handing over the entire stock to them along with a
payment of ₹23,000 by cheque.
3. There was old furniture which had been completely written off from the books of the firm. It
was taken over by Vasudha at ₹2,000.
4. Dewan undertook to pay Ms. Dewan’s loan of ₹45,000.
5. Dewan was appointed to look after the process of dissolution for which he was allowed a
remuneration of ₹7,000. He agreed to bear the dissolution expenses. Actual expenses
incurred by Dewan were ₹11,000, which were paid by the firm.
6. Loss on realisation amounted to ₹9,000.
31. Pass the necessary journal entries to record the above transactions in the books of the
firm. (C.B.S.E. 2020, Rajasthan)
Ans. 1. Debit Bank A/c and Credit Realisation A/c by ₹62,300.
2. Debit Realisation A/c and Credit Bank A/c by ₹23,000.
3. Debit Vasudha’s Capital A/c and Credit Realisation A/c by ₹2,000.
4. Debit Realisation A/c and Credit Dewan’s Capital A/c by ₹45,000.
5. (i) Debit Realisation A/c and Credit Dewan’s Capital A/c by ₹7,000 and
(ii) Debit Dewan’s Capital A/c and Credit Bank A/c by ₹11,000.
6. Debit Vasudha’s Capital A/c by ₹3,600 and Dewan’s Capital A/c by ₹5,400 and Credit
Realisation A/c by ₹9,000.
Q. 32. Pass the necessary journal entries for the following transactions on the dissolution of
the partnership firm of Tony and Rony after the various assets (other than cash) and external
liabilities have been transferred to Realization Account:
(i) An unrecorded asset of ₹2,000 and cash ₹3,000 was paid for liability of ₹6,000 in full
settlement.
(ii) 100 shares of ₹10 each have been taken over by partners at market value of ₹20 per share
in their profit sharing ratio, which is 3 : 2.
(iii) Stock of ₹30,000 was taken over by a creditor of ₹40,000 at a discount of 30% in full
settlement.
(iv) Expenses of realisation ₹4,000 were to be borne by Rony. Rony used the firm’s cash for
paying these expenses.
(C.B.S.E. 2020, Chennai, Mumbai)
Ans. (i) Debit Realisation A/c and Credit Cash by ₹3,000.
(ii) Debit Tony’s Capital A/c by ₹1,200 and Rony’s Capital A/c by ₹800 and Credit Realisation
A/c by ₹2,000.
(iii) No Entry.
(iv) Debit Rony’s Capital A/c and Credit Cash A/c by ₹4,000.
Q. 33 Pass necessary journal entries in the following cases on the dissolution of a partnership
firm of partners X, Y, A and B :
(i) Realization expenses of ₹5,000 were to borne by X, a partner. However, it was paid by Y.
(ii) Investments costing ₹25,000 (comprising 1,000 shares), had been written off from the
books completely. These shares are valued at ₹20 each and were divided amongst the
partners.
(iii) Y’s loan of ₹50,000 settled at ₹48,000.
(iv) Machinery (book value ₹6,00,000) was given to a creditor at a discount of 20%. . (C.B.S.E.
Sample Paper, 2020)
Ans. (i) Debit X’s Capital A/c and Credit Y’s Capital A/c by ₹5,000.
(ii) Debit Partner’s Capital A/cs by ₹5,000 each and Credit Realisation A/c by ₹20,000.
(iii) Debit Y’s Loan A/c by ₹50,000 and Credit Bank A/c by ₹48,000 and Realisation A/c by
₹2,000.
(iv) No Entry.
34 Pass the necessary journal entries for the following transactions in case of dissolution of
the partnership firm of X and Y after various assets (other than cash and bank) and third party
liabilities have been transferred to Realisation Account:
(i) Dissolution expenses were ₹4,000.
(ii) Machinery of the book value of ₹ 50,000 was sold in the market for ₹47,000 for which a
commission of ₹500 was paid to the broker.
(iii) A creditor for ₹ 70,000 accepted stock valued at ₹90,000 and paid to the firm ₹20,000.
(iv) Loss on realisation ₹40,000 was divided between the partners X and Y in the ratio of 5 :
3. (C.B.S.E. 2021, C)
[Ans. (ii) Debit Bank A/c and Credit Realisation A/c by ₹46,500.
(iii) Debit Bank A/c and Credit Realisation A/c by ₹20,000. |
Preparation of Memorandum Balance Sheet
35 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?
[Ans.: Final Payments: Angad—₹ 40,000; Raman—₹ 30,000.]
36. A, B and C were partners sharing profits in the ratio of 5 : 3 : 2. On 31st March, 2023, A's
Capital and B's Capital were ₹ 30,000 and ₹ 20,000 respectively but C owed ₹ 5,000 to the
firm. The liabilities were ₹ 20,000. The assets of the firm realised ₹ 50,000.
Prepare Realisation Account, Partners’ Capital Accounts and Bank Account.
[Ans.: C will pay ₹ 8,000; A will get ₹ 22,500 and B ₹ 15,500.]
37 A and B were partners sharing profits and losses as to 7/11th to A and 4/11th to B. They
dissolved the partnership on 30th May, 2022. As on that date their capitals were: A₹ 7,000
and B ₹ 4,000. There were also due on Loan A/c to A ₹ 4,500 and to B ₹ 750. The other
liabilities amounted to ₹ 5,000. The assets proved to have been undervalued in the last
Balance Sheet and actually realised ₹ 24,000.
Prepare necessary accounts showing the final settlement between partners.
[Ans.: Gain (Profit) on Realisation—₹ 2,750; Final Payment: A—₹ 8,750; 8—₹ 5,000.
Q. 38. A, B and C are in partnership sharing in 4 : 3 : 3. They decided to dissolve the
partnership firm. At the date of dissolution their creditors amounted to ₹ 16,800 and in the
course of dissolution a contingent liability of ₹3,500 not brought into the accounts matured and
had to be met. Their capitals stood at ₹ 12,000, ₹ 10,000 and ₹8,000 respectively. B had lent
to the firm in addition to Capital ₹ 13,200. The assets realised ₹45,670.
Prepare the Realisation Account and Partners’ Capital Accounts. Also show the Bank Account.
[Ans. Sundry Assets ₹60,000; Loss on Realisation ₹ 17,830. Final payment to A ₹4,868; B
₹4,651; C ₹2,651. Total of Cash A/c ₹45,670.]
Q. 39. Ashok and Kishore were in partnership sharing profits in the ratio of 3 1. They agreed
to dissolve the firm. The assets (other than cash of ₹2,000) of the firm realised ₹ 1,10,000.
The liabilities and other particulars of the firm on that date were as follows :—

Creditors 40,000

Ashok’s Capital 1,00,000

Kishore’s Capital 10,000 (Dr. balance)

Profit & Loss Account 8,000 (Dr. balance)

Realisation Expenses were 1,000

Creditors were settled in full settlement at ₹38,000. Prepare Realisation and Cash Account.
[Ans. Book value of Assets (other than Cash) ₹ 1,20,000. Loss on Realisation ₹9,000. Final
settlement: Kishore brings in ₹14,250 and Ashok is paid ₹87,250; Total of Cash A/c ₹
1,26,250.]
40 A, B and C started business on 1st April, 2022 with capitals of ₹ 1,00,000; ₹
80,000 and ₹ 60,000 respectively sharing profits (losses) in the ratio of 4 : 3 : 3. For the year
ended 31st March, 2023, firm incurred loss of ₹ 50,000. Each of the partners withdrew ₹
10,000 during the year.
On 31st March, 2023, the firm was dissolved, the creditors of the firm stood at ₹ 24,000 on
that date and Cash in Hand was ₹ 4,000. The assets realised ₹ 3,00,000 and Creditors were
paid ₹ 23,500 in full settlement of their claims.
Prepare Realisation Account and show your workings clearly.
[Ans.: Gain (Profit) on Realisation—₹ 1,20,500; Capital as on 31 st March, 2022
A—₹ 70,000; B—₹ 55,000; C—₹ 35,000; Sundry Assets—₹ 1,80,000.]
41 Priya, Komal and Rakhi were in partnership sharing profits and losses in the ratio of 2:1:1.
They decided to dissolve the partnership. On that date of dissolution, Sundry Assets (including
cash ₹ 5,000) amounted to ₹ 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.
[Ans.: Recorded Liabilities—₹ 28,000; Loss on Realisation—₹ 11,000.]
Q. 42 A, B and C were partners from 1st April 2020 with capitals of ₹3,00,000; ₹2,00,000 and
₹ 1,50,000 respectively. They shared profits in the ratio of 2 : 2 : 1. They carried on business
for two years. In the first year ending on 31 st March, 2021, they made a profit of ₹2,00,000
but in the second year ending on 31st March, 2022, a loss of ₹60,000 was incurred. As the
business was no longer profitable they dissolved the firm on 31st March, 2022. Creditors on
that date were ₹75,000. The partners withdrew for personal use ₹40,000 per partner per year.
The assets realised ₹4,00,000. The expenses of realisation were ₹5,000.
Prepare Realisation Account and show your workings clearly.
[Ans. Balances of Capital A/cs before Dissolution A ₹2,76,000; B ₹ 1,76,000 and C ₹98,000;
Total Assets ₹6,25,000; Loss on Realisation ₹2,30,000.]

43 The partnership between A and B was dissolved on 31st March, 2023. On that date the
respective credits to the capitals were A—₹ 1,70,000 and B—₹ 30,000. ₹ 20,000 were owed
by B to the firm; ₹ 1,00,000 were owed by the firm to A and ₹ 2,00,000 were due to the Trade
Creditors. Profits and losses were shared in the proportions of 2/3 to A, 1/3 to B.
The assets represented by the above stated net liabilities realised ₹ 4,50,000 exclusive of ₹
20,000 owed by B. The liabilities were settled at book figures. Prepare Realisation Account,
Partners’ Capital Accounts and Cash Account showing the distribution to the partners.
[Ans.: Loss on Realisation—₹ 30,000.]
44. X and Y were partners sharing profits and losses in the ratio of 3 : 2. They decided to
dissolve the firm on 31 st March, 2023. 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.
[Ans.: Total Sundry Assets—₹ 94,000; Loss on Realisation—₹ 3,500;
X receives—₹ 51,900; Y receives—₹ 28,600.]
45. P, Q and R are partners sharing profits and losses in the ratio of 3 ; 3 : 2. Their respective
capitals are in their profit-sharing proportions. On 1st April, 2022, the total capital of the firm
and balance of General Reserve are ₹ 80,000 and ₹ 20,000 respectively. During the year
2022-23, the firm earned profit of ₹ 28,000 before charging interest on capital @ 5%. The
drawings of the partners are P—₹ 8,000; Q—₹ 7,000; and R—₹ 5,000. On 31st March, 2023,
their liabilities were ₹ 18,000.
On this date, they decided to dissolve the firm. The assets 226ealizat ₹ 1,08,600 and
226ealization expenses amounted to ₹ 1,800.
Prepare necessary Ledger Accounts to close the books of the firm.
[Ans.: Assets at the time of dissolution—₹ 1,26,000; Loss on Realisation—₹ 19,200;
Final payments: P—₹ 32,800; Q—₹ 33,800; R—₹ 22,200.]
 ISSUE OF SHARES
Q.1 X Ltd. company issued 1,00,000 shares of ₹ 10 each payable as ₹ 2 on
application , ₹ 3 on allotment & ₹ 5 on first call. All money was duly received. Pass
journal entries.

Q.2 Y Ltd. Company issued 50,000 shares of ₹ 10 each , payable as ₹ 2 on

application , ₹ 3 on allotment & ₹ 4 on first call & balance on second call. All money
was duly received. Pass journal entries.

Q.3 Z Ltd. Company issued 20,000 shares of ₹ 10 each , payable as ₹ 3 on

application , ₹ 4 on allotment & ₹ 2 on first call & balance when required. All money
was duly received. Pass journal entries.

Q.4 Ravi Ltd company issued 1,00,000 shares of ₹ 10 each , payable as ₹ 2 on

application , ₹ 3 on allotment & ₹ 5 on first call & final call. All money was duly
received except Ram holder of 1000 shares didn’t pay allotment & first call. Pass
journal entries.

Q.5 X Ltd. Company issued 50,000 shares of ₹ 10 each , payable as ₹ 2 on

application , ₹ 3 on allotment & ₹ 4 on first call & ₹1 on second call. A holder of 1000
shares didn’t pay allotment & both calls. B holder of 500 shares didn’t pay both calls.
Pass journal entries.

Q.6 Z Ltd. Company issued 2,00,000 shares of ₹ 10 each , payable as ₹ 2 on

application , ₹ 2 on allotment & ₹ 3 on first call & balance on second call. Ravi holder
of 5,000 shares didn’t pay allotment & both calls , Kavi holder of 3,000 shares didn’t
pay both calls , Nabi holder of 2,000 shares didn’t pay second call . Pass journal
entries.

Q. 7 X Ltd. Company issued 1,00,000 shares of ₹ 10 each , payable as ₹ 2 on

application , ₹ 3 on allotment & ₹ 5 on first call. Rakesh holder of 1000 shares paid
entire balance along with allotment. Pass journal entries.

Q.8 Y Ltd. Company issued 50,000 shares of ₹ 10 each , payable as ₹ 2 on

application , ₹ 3 on allotment & ₹ 4 on first call & ₹1 on second call. Rajat holder of
1000 shares didn’t pay allotment & both calls whereas Kanak holder of 500 shares
paid entire balance with allotment. Pass journal entries.

Q. 9 X Ltd. Company issued 1,00,000 shares of ₹ 10 each at ₹2 premium , payable

as ₹ 4 on application , ₹ 5 on allotment & ₹ 3 on first call. All money was duly
received. Pass journal entries.

Q.10 Y Ltd. Company issued 50,000 shares of ₹ 10 each at ₹ 3 premium , payable

as ₹ 4 on application ( including ₹1 premium , ₹ 5 on allotment ( including ₹1
premium ) , & ₹ 4 on first call ( including ₹1 premium ) All money was duly received.
Pass journal entries.
11. Premier Ltd. issued 50,000 Equity Shares of ₹ 100 each at a premium of ₹ 50 per
share, payable as follows:
₹ 100 per share on Application; and
Balance on Allotment.
The issue was subscribed and shares were issued to the applicants. Pass the
necessary Journal entries.
12. Selma Ltd. issued for subscription 10,000 shares of ₹ 25 each, payable ₹ 5 per
share on application, ₹ 10 per share on allotment (including ₹ 5 per share as premium),
₹ 5 per share as first call on the shares and the balance in two equal amounts at
intervals of three months. All the shares were applied for and allotted. Due amount
was received except the second call and final call on 200 and 400 shares respectively.
Pass the entries in the company's Journal.
13. Bharat Ltd. was incorporated with a capital of₹ 2,00,000 divided into shares of ₹
10 each. 2,000 shares were offered for subscription and out of these, 1,800 shares
were applied for and allotted. ₹ 3 per share (including ₹ 1 premium) was payable on
application, ₹ 4 per share (including 71 premium) on allotment, ₹ 2 per share on first
call and ₹ 3 per share on final call. All the money was received. Give necessary Journal
entries
14. Authorised capital of Suhani Ltd. is ₹ 45,00,000 divided into 30,000 shares of ₹
150 each. Out of these company issued 15,000 shares of ₹ 150 each at a premium of
₹ 10 per share. The amount was payable as follows: ₹ 50 per share on application, ₹
40 per share on allotment (including premium), ₹ 30 per share on first call and balance
on final call. Public applied for 14,000 shares. All the money was duly received.
Prepare an extract of Balance Sheet of Suhani Ltd. as per Schedule III, Part I of the
Companies Act, 2013 disclosing the Share Capital. (Delhi2013, Modified)
[Ans.: Share Capital—₹ 21,00,000.]
15 X Ltd. issued 20,000, 7% Preference shares of ₹ 100 each at a premium of 6%.
Payments were to be made as—₹25 on Application; ₹46 on Allotment, ₹ 10 on First
call and ₹25 on Final Call.
The applications for 18,000 shares were received and all were accepted. All the money
was duly received except the first and final call on 100 shares.
Give the necessary Journal Entries. Also show the Share Capital in the Balance Sheet
of the Company.
[Ans. First Call in arrear ₹ 1,000; Final Call in arrear ₹2,500; Share Capital ₹17,96,500;
Securities Premium ₹1,08,000.]
Hint: It will be assumed that premium is included in allotment.
Q. 16. Shipra Limited invited applications for 80,000 shares of ₹ 10 each payable as
follows :
₹2.50 on Application (on 1st May, 2021);
₹2.50 on Allotment (on 1st June, 2021);
₹2 on First Call (on 1st Nov., 2021); and
₹3 on Second Call (on 1st Feb., 2022)
All the shares were applied and allotted. Shankar, holding 600 shares paid the whole
of the amount alongwith allotment.
Pass Cash Book and Journal entries assuming that books are closed on 31st March
every year.
Q. 17. On 1st February 2022, Raj Ltd. received in advance the first call of ₹25 per
share on 400 equity shares. The first call was due on 31st March 2020.
Journalise the above transactions.
Q. 18. A limited Company was registered with a capital of ₹5,00,000 in shares of ₹ 10
each and issued 20,000 such shares at a premium of ₹2 per share, payable as ₹3 per
share on application, per share on allotment (including premium) and ₹2 per share on
first call made three months later. All the money payable on application and allotment
were duly received but when the first call was made, one shareholder paid the entire
balance on his holdings of 300 shares, and another shareholder holding 1,000 shares
failed to pay the first call money.
Give Journal entries to record the above transactions.
Hint Second Call has not been made in the question, as such, the entries are to be
passed upto first call only.
Q. 19. On 28-2-2023 the first call of ₹2 per share became due on 50,000 equity shares
allotted by Kumar Ltd. Komal, a holder of 1,000 shares, did not pay the first call money.
Kovil, a holder of 750 shares, paid the second and final call of ₹4 per share along with
the first call. Pass necessary Journal entry for the amount received by opening call-in-
arrear and calls-in-advance accounts in the books of the company.
[Ans. Amount received ₹ 1,01,000.]
28. Ghosh Ltd. made the second and final call on its 50,000 Equity Shares @ ₹ 2 per share
on 1st January, 2016. The entire amount was received on 15th January, 2016 except on 100
shares allotted to Venkat. Pass necessary Journal entries for the call money due and received
by opening Calls-in-Arrears Account. (Al 2006 C, Modified)
[Ans.: (i) Dr. Equity Shares Second and Final Call A/c and Cr. Equity Share Capital by ₹
1,00,000.
(ii) Dr. Bank A/c—₹ 99,800 and Calls-in-Arrears A/c—₹ 200;
Cr. Equity Shares Second and Final Call A/c—₹ 1,00,000.]
29. Amit Ltd. was registered with a capital of ₹ 5,00,000 in shares of ₹ 10 each and issued
20,000 such shares at a premium of ₹ 2 per share, payable as ₹ 2 per share on application, ₹
5 per share on allotment (including premium) and ₹ 2 per share on first call made three months
later. All the money payable on application and allotment was duly received but when the first
call was made, one shareholder paid the entire balance on his holding of 300 shares and
another shareholder holding 1,000 shares failed to pay the first call money. Pass Journal
entries to record the above transactions and show how they will appear in the company's
Balance Sheet.
[Ans.: Balance Sheet Total—₹ 1,78,900.]
30. Prem Industries Ltd. made the first call of ₹ 2 per share on its 1,00,000 Equity Shares on
1st March, 2021. Ashok, a shareholder, holding 800 shares paid the second and final call
amount along with the first call money. The second and final call amount was ₹ 3 per share.
Pass necessary Journal entries for recording the above using the Calls-in-Advance Account.
Over-Subscription
Q. 31. On October 1, 2021 A Ltd. offered 1,00,000 shares of ₹10 each payable as follows:
On Application ₹3 per share
On Allotment (November 1, 2021) ₹2 per share
On First Call (December 1, 2021) ₹3 per share
On Second and Final Call (One month after first call) ₹2 per share
Applications were received for 1,25,000 shares on October 15,2021. Applications for 1,20,000
shares were allotted 1,00,000 shares and the remaining applications were rejected.
Give journal entries
Q. 32. Govind Ltd., issued a prospectus inviting applications for 20,000 shares of ₹10 each at
a premium of ₹3 per share, payable as to ₹4 on application; ₹5 on allotment (including
premium); ₹2 on First call; and ₹2 on Final call.
Applications were received for 27,000 shares. Directors allotted the shares as follows :
To applicants of 16,000 shares ……….. full allotment
To applicants of 6,000 shares ………… 4,000 shares
To applicants of 5,000 shares …………. Nil
Give entries in the Cash Book and Journal, assuming that all sums due on allotment and calls
have been received.
[Ans. Cash at Bank ₹2,60,000.]
Q. 33. A Ltd. issued shares for ₹20,00,000 divided into shares of ₹ 10 each at a premium of ₹
5 per share, payable as under :
On Application ₹4 per share
On Allotment ₹ 6 (including premium of ₹3)
On First and Final Call Balance
Excess application money was to be adjusted against allotment and first and final call and the
money on rejected applications was to be returned.
The issue was oversubscribed to the extent of 80,000 shares and the allotment was made as
follows :
Applicants of 1,00,000 shares were allotted 30% shares, applicants for 10,000 shares were
rejected and the remaining applicants were given full allotment.
All the money was duly received. Give journal entries.
[Ans. Amount transferred to Calls in Advance Account ₹ 1,00,000; Amount received on
Allotment ₹ 10,20,000; Amount received on First & Final Call ₹9,00,000.]
Q. 34 A Company invited applications for 5,000 shares of ₹ 100 each. The amount is payable
as follows :
On Application : ₹20 per share
On Allotment : ₹30 per share
On First Call : ₹20 per share
On Second and Final Call : ₹30 per share
Applications were received for 8,000 shares. Applications for 1,000 shares were rejected and
pro-rata allotment was made to the remaining applicants.
All calls were made and duly paid except:
(i) Ganesh, the holder of 200 shares paid the two calls with allotment.
(ii) Shiva, the holder of 300 shares failed to pay the first and second call money.
Pass necessary journal entries to record the above transactions.
[Ans. Net amount received on first call ₹90,000 and on Second Call ₹ 1,35,000.]
assuming that all amounts have been received and the company maintains a combined
account for application and allotment.
35. Faber Ltd. invited applications for 70,000 equity shares of ₹ 100 each. The application
money received @ ₹ 30 per share was ₹ 27,00,000. Name the kind of subscription. List the
three alternatives for allotting these shares. [Ans.: Oversubscription.]
36. Sangam Marbles Ltd. invited applications for 20,000 Equity Shares of ₹ 100 each issued
at par payable on application. The issue was oversubscribed by 5,000 shares and allotment
was made on pro rata basis. Pass necessary Journal entries.
[Hint: Shares applied are 25,000 (20,000 + 5,000.]
37. Citizen Watches Ltd. invited applications for 50,000 shares of ₹ 10 each payable ₹ 3 on
application, ₹ 4 on allotment and balance on first and final call. Applications were received for
60,000 shares. Applications were accepted for 50,000 shares and remaining applications were
rejected. All calls were made and received except First and Final call on 500 shares.
Pass the Journal entries in the books of Citizen Watches Ltd.
38. Eastern India Company Limited, having an authorised capital of ₹ 10,00,000 divided into
shares of ₹ 10 each, issued 50,000 shares at a premium of ₹ 3 per share payable as follows:
On Application ₹ 3 per share;
On Allotment (including premium) ₹ 5 per share;
On First Call (due three months after allotment) ₹ 3 per share;
and the balance as and when required.
Applications were received for 60,000 shares and the directors allotted the shares as follows:
(i) Applicants for 40,000 shares received in full.
(ii) Applicants for 15,000 shares received an allotment of 8,000 shares.
(iii) Applicants for 5,000 shares received 2,000 shares on allotment, excess money being
returned.
All amounts due on allotment were received.
The first call was made and the money was received except on 100 shares.
Give Journal and cash book entries to record these transactions of the company. Also prepare
the Balance Sheet of the company. (NCERT, Modified)

39. Tiny Toys Ltd. issued ₹ 10,00,000 shares of ₹ 100 each at a premium of₹ 20 for
subscription payable as:
₹ 10 per share on application,
₹ 40 per share and ₹ 10 premium on allotment, and
₹ 50 per share and ₹ 10 premium on final payment
Issue was oversubscribed receiving applications for 13,000 shares. Applicants for 11,000
shares were allotted 10,000 shares and applicants for 2,000 shares were sent letters of regret.
All the money due on allotment and final call was duly received. Pass necessary entries in the
company's books to record the above transactions. Also, prepare company's Balance Sheet
on completion of the above transactions.
[Ans.: Balance Sheet Total—₹ 12,00,000.]
40. Sugandh Ltd. issued 60,000 shares of ₹ 10 each at a premium of ₹ 2 per share payable
as₹ 3 on application, ₹ 5 (including premium) on allotment and the balance on first and final
call. Application money received was ₹ 2,76,000. It was resolved to allot as follows:
(i) Applicants of 40,000 shares 30,000 shares,
(ii) Applicants of 50,000 shares 30,000 shares,
(iii) Applicants of 2,000 shares Nil.
Mohan, who had applied for 800 shares in Category (i) and Sohan, who was allotted 600
shares in Category (ii) failed to pay the allotment money. Calculate amount received on
allotment.
[Ans.: Amount received on allotment—₹ 2,05,800.]
[Hint: Shares applied are 92,000 (₹ 2,76,000 + ₹ 3.)
41. Sony Media Ltd. issued 50,000 shares of₹ 10 each payable ₹3 on application, ₹ 4 on
allotment and balance on first and final call. Applications were received for 1,00,000 shares
and allotment was made as follows:
(i) Applicants for 60,000 shares were allotted 30,000 shares,
(ii) Applicants for 40,000 shares were allotted 20,000 shares.
Anupam to whom 1,000 shares were allotted from category (i), failed to pay the allotment
money.
Pass Journal entries up to allotment.
Undersubscription
42. Quality Stationers Ltd. registered with authorised capital of ₹ 20,00,000 divided into
1,00,000 equity shares of ₹ 20 each. 50,000 Equity Shares were issued for subscription at
par, issue price being payable along with application. It received application money of ₹
4,40,000.
You are required to pass the necessary Journal entries.
43. A-one Product Ltd. is registered with authorised capital of ₹ 10,00,000 divided into 50,000
equity shares of ₹ 20 each. It issued 25,000 Equity Shares for subscription at premium of ₹ 2
per share, issue price being payable along with application. It received ₹ 4,62,000 towards
application money.
You are required to pass the necessary Journal entries.
44. Home Products Ltd. is registered with authorised capital of ₹ 10,00,000 divided into
1,00,000 equity shares of₹ 10 each. It issued 70,000 Equity Shares for subscription at
premium of ₹ 2 per share, payable ₹ 3 on application, ₹ 5 on allotment and balance on first
and final call. It received subscription for 62,500 shares. You are required to pass the
necessary Journal entries.
[Hint: Minimum subscription is not received.]
45. Pure Products Ltd. is registered with authorised capital of ₹ 10,00,000 divided into
1,00,000 equity shares of ₹ 10 each. It issued 70,000 Equity Shares for subscription at
premium of ₹ 2 per share, payable ₹ 3 on application, ₹ 5 on allotment and balance on first
and final call. It received application money amounting to₹ 1,89,000.
You are required to:
(i) Determine whether the company should allot shares; and
(ii) If yes, pass the necessary Journal entries assuming that the company has received due
amount on allotment and call.
Forfeiture of Shares Issued at Par
Q. 46.X Ltd. was registered with an authorised capital of 2,00,000 shares of ₹10 each. It
issued applications for 1,20,000 shares payable as under:
₹2.50 on application
₹2.50 on allotment
₹2 on first call and ₹3 on final call.
Amount due on allotment and first call was duly received. However, a shareholder holding 400
shares did not pay the final call. Directors forfeited the shares of defaulting shareholder . pass
journal enries .
Q. 47 Alfa Ltd. issued 5,000 shares of ₹ 100 each at par. The amount payable was as under
:
₹25 on application;
₹25 on allotment;
₹20 on first call; and
₹30 on final call.
The company did not make final call. X, a holder of 100 shares, failed to pay allotment and
first call money. Directors forfeited his shares.
Pass Journal entries in the books of the company
Q. 48. Dinesh Ltd. issued 5,000 shares of ₹ 100 each at par, payable as follows :

On Application 25
On Allotment 25
On First Call 20
On Final Call 30
Anil, holding 100 shares failed to pay the amount of allotment and first call and his shares
were forfeited after the first call.
Sunil, holding 200 shares failed to pay the amount due on final call and his shares were also
forfeited.
Show entries in the books of Dinesh Ltd. Company

Q. 49 Fast Food Ltd. issued a prospectus offering 10,000 equity shares of ₹50 each at par
payable as follows :
₹
On Application 15
On Allotment 10
On First Call 15
On Final Call 10
Ram, the holder of 500 equity shares did not pay the amount due on both the calls. These 500
shares were forfeited by the Board of Directors.
Show the entries in Journal of the Company.

Q.50 Z Ltd. was registered with an authorised capital of ₹ 10,00,000 divided into
10,000 shares of ₹ 100 each. The Company offered 5,000 of these shares to the public, which
were payable ₹25 per share on application, ₹50 per share on allotment and the balance three
months later. Applications for 7,100 shares were received on which the directors allotted as
follows :
Applications for 4,000 Shares Full
Applications for 3,000 Shares 1,000
Applications for 100 Shares Nil
₹ 1,85,000 was realised on account of allotment money (excluding the amount carried from
application money) and ₹ 1,15,000 on account of call. The Directors decided to forfeit those
shares on which allotment money was overdue.
Show the entries in the company’s books.
[Ans. Amount credited to Share Forfeiture Account ₹7,500]
Q. 51 Nilgiri Tea Ltd. invited applications from the public for the issue of 1,00,000 Equity shares
of ₹20 each payable as:
₹ 5 on Application
₹7 on Allotment
Balance on Call
The public applied for 90,000 shares which were duly allotted by the company.
₹6,27,200 were received by the company on allotment and ₹7,12,800 on call.
The company forfeited those shares on which both, allotment and call money was not
received.
You are required to pass journal entries to record the above transactions in the books of the
company..
Q. 52. W Ltd. issued 10,000 shares of ₹ 100 each. During the year only ₹80 were called
payable as follows :
On Application ₹25
On Allotment ₹20
On Ist Call ₹20
On Ilnd Call ₹15
Amounts were received as follows:
On 8,000 shares the full amount called
On 1,200 shares ₹65 per share
On 500 shares ₹45 per share
On 300 shares ₹25 per share
The directors forfeited those shares on which less than ₹65 per share were received. Show
entries in the Book
 RE-ISSUE OF SHARES.
Q. 53 Pass journal entries for the forfeiture and re-issue in the following cases :
(i) A Ltd. forfeited 100 shares of ₹10 each fully called-up for non-payment of first call of ₹3 per
share and final call of ₹3 per share. All of these shares were re-issued as fully paid for ₹ 10
per share.
(ii) B Ltd. forfeited 400 shares of ₹ 10 each fully called-up for non-payment of final call of ₹3
per share. 300 of these shares were re-issued as fully paid for ₹8 per share.
(iii) C Ltd. forfeited 700 shares of ₹ 10 each fully called-up on which the holder has paid
application money @ ₹3 and allotment money @ ₹2 per share. Out of these, 300 shares were
re-issued as fully paid @ ₹7 per share.
(iv) D Ltd. forfeited 1,000 shares of ₹10 each fully called-up on which the holder has paid only
the application money @ ₹3 per share. Out of these, 600 shares were re-issued at ₹ 10.50
per share, fully paid up.
[Ans. Amount transferred to Capital Reserve : Case (i) ₹400; Case (ii) ₹ 1,500; Case (iii) ₹600;
Case (iv) ₹ 1,800.]
Q. 54 Pass journal entries for the forfeiture and re-issue in the following cases :
(a) X Ltd. forfeited 700 shares of Ashok of ₹10 each ₹8 called-up, on which he had paid ₹5
per share. Out of these, 500 shares were re-issued for ₹9 per share as fully paid.
(b) Y Ltd. forfeited 400 shares of ₹ 10 each, ₹6 called-up, for non-payment of first call of ₹2
per share. Out of these, 300 shares were immediately re-issued at ₹5 per share.
(c) Z Ltd. forfeited 300 shares of ₹ 100 each on which first call of ₹20 per share was not
received, the second and final call of ₹30 per share has not yet been called. Out of these, 200
shares were re-issued as ₹70 paid-up for ₹55 per share.
[Ans. Capital Reserve (a) ₹2,000; (b) ₹900; (c) ₹ 7,000.]
Q. 55 Journalise the following :
(i) A Ltd. forfeited 1,000 shares of ₹10 each, ₹8 paid, for non-payment of final call of ₹2 per
share. Out of these, 400 shares were re-issued as fully paid-up in such a way that ₹2,000
were transferred to capital reserve.
(ii) B Ltd. forfeited 1,000 shares of ₹ 10 each, ₹8 called-up, for non-payment of Allotment of
₹2.50 per share and first call of ₹3 per share. Out of these, 400 shares were re-issued for ₹7
per share as ₹8 paid-up.
(iii) C Ltd. forfeited 300 shares of ₹10 each on which ₹7 has been called and ₹5 has been
paid. Out of these, 100 shares are re-issued for ₹6 per share as ₹7 paid-up.
[Ans. (i) Re-issue price ₹7 per share; Capital Reserve (ii) ₹600; (iii) ₹400.]

Forfeiture and Reissue of Shares which were Issued at Par

56 Z Ltd. issued 10,000 shares of the value of ₹ 10 each, payable ₹ 3 on application, ₹ 3 on
allotment and Non the first and final call. All amounts are duly received except the call money
on 100 shares. These shares are subsequently forfeited by Directors and are resold as fully
paid-up for ₹ 500. Give necessary Journal entries for the transactions.
[Ans.: Capital Reserve—₹ 100.]
57 Alfa Ltd. forfeited 900 Equity Shares of ₹ 100 each for the non-payment of allotment money
of ₹ 30 per share and the first call of ₹ 20 per share. The second and final call of ₹ 25 per
share has not been made. The forfeited shares were reissued for ₹ 90 per share, ₹ 75 paid-
up.
Journalise the above. [Ans.: Capital Reserve—₹ 22,500.]
58 Max Ltd. forfeited 500 shares of ₹ 100 each for non-payment of first call of ₹ 20 per share
and final call of ₹ 25 per share. 250 of these shares were re-issued at ₹ 50 per share fully
paid-up.
Pass the necessary Journal entries in the books of Max Ltd. for forfeiture and re-issue of
shares. Also prepare the Share Forfeiture Account. (CBSE2020)
[Ans.: Gain on re-issue transferred to Capital Reserve—₹ 1,250.]
59 On 1st May, 2022, Moneyplus Ltd. forfeited 200 shares of ₹ 20 each, ₹ 15 per share called-
up, on which ₹ 10 per share has been paid by A, the amount of the first call of₹ 5 per share
being unpaid. Ten days later, the Directors reissued the forfeited shares to 6 credited as ₹ 15
per share paid-up, for a payment of ₹ 10 per share.
Give Journal entries in the company's books to record the forfeited shares and their reissue.
[Ans.: Capital Reserve—₹ 1,000.]
60. The Directors of Maharana Ltd. resolved on 1st May, 2020 that 2,000 Equity Shares of ₹
10 each, ₹ 7.50 paid be forfeited for non-payment of final call of ₹ 2.50. On 10th June,
2020,1,800 of these shares were reissued for ₹ 6 per share. Give necessary Journal entries.
[Ans.: Capital Reserve—₹ 6,300.]
61. Sunshine Industries Ltd. issued 20,000 shares of₹ 100 each payable₹ 25 per share on
application,₹ 25 per share on allotment and the balance in two calls of ₹ 25 each. The company
did not make the final call of ₹ 25 per share. All the money was duly received with the exception
of the amount due on the first call on 400 shares held by Mr. Modi.The Board of Directors
forfeited these shares and subsequently reissued them @ ₹ 75 per share paid-up for a sum
of ₹ 28,000.
Journalise the above transactions and prepare Share Capital Account.
[Ans.: Capital Reserve—₹ 18,000.]
62. R.P. Ltd. forfeited 1,500 shares of Rahim of₹ 10 each issued at a premium of ₹ 3 per share
for non-payment of allotment and first call money. Rahim had applied for 3,000 shares. On
these shares, amount was payable as follows:
On Application ₹ 3 per share,
On Allotment (including premium) ₹ 5 per share,
On First Call ₹ 3 per share,
On Final Call Balance.
Final call has not been called up. 1,000 of the forfeited shares were reissued for ₹ 8,500 as
fully paid-up.
Record the necessary Journal entries for the above transactions in the books of R.P. Ltd.
(CBSE2020)
[Ans.: Capital Reserve—₹ 3,500.]
63 The Hindustan Manufacturing Ltd. had a total subscribed capital of₹ 10,00,000 in Equity
Shares of₹ 10 each of which ₹ 7.50 were called-up. A final call of ₹ 2.50 was made and all
amount paid except two calls of ₹ 2.50 each in respect of 100 shares held by D. These shares
were forfeited and reissued at₹ 8 per share. Pass necessary Journal entries to record the
transactions of final call, forfeiture of shares and reissue of forfeited shares. Also, prepare the
Balance Sheet of the company.
[Ans.: Capital Reserve—₹ 300; Balance Sheet Total—₹ 10,00,300.]
64. Star Ltd. forfeited 500 Equity shares of ₹ 100 each for non-payment of first call of ₹ 30 per
share. The final call of ₹ 10 per share was not yet made. Out of these, 60% shares were
reissued for ₹ 39,000 fully paid. Journalise the forfeiture and reissue of shares.
[Ans.: Capital Reserve—₹ 18,000.]
65 Super Star Ltd makes an issue of 10,000 Equity Shares of ₹ 100 each, payable as:
On Application and Allotment ₹ 50 per share,
On First Call ₹ 25 per share,
On Second and Final Call ₹ 25 per share.
Members holding 400 shares did not pay the second and final call and the shares are duly
forfeited, 200 of which are reissued as fully paid-up @ ₹ 50 per share. Pass Journal entries in
the books of the company.
[Ans.: Capital Reserve—₹ 5,000.]
66 Give necessary Journal entries:
(i) The Directors of Devendra Ltd. resolved on 1st January, 2010 that 100 Equity Shares of ₹
10 each, ₹ 8 paid-up be forfeited for non-payment of final call of ₹ 2. On 1st February, 60 of
these shares were reissued @ ₹ 7 per share as fully paid-up.
(ii) Virender Limited forfeited 20 shares of ₹ 100 each (₹ 60 called-up) issued at par to Mukesh
on which he had paid ₹ 20 per share. Out of these, 15 shares were reissued to Sanjeev as ₹
60 paid-up for ₹ 45 per share.
[Ans.: (i) Capital Reserve—₹ 300; (ii) Capital Reserve—₹ 75.]
67 Show the forfeiture and reissue entries under each of the following cases:
(i) KBC Ltd. forfeited 300 shares of₹ 10 each, ₹ 8 called-up held by Amit for non-payment of
second call money of ₹ 3 per share. These shares were reissued to Zoly for ₹ 10 per share as
fully paid-up.
(ii) KK Ltd. forfeited 400 shares of ₹ 10 each, fully called-up, held by Bhawna for non-payment
of final call money of ₹ 4 per share. These shares were reissued to Tarun at ₹ 12 per share
as fully paid-up.
(iii) Light Ltd. forfeited 250sharesof ₹ 10 each, fully called-up, held by Chetan for non-payment
of allotment money of ₹ 3 per share and first and final call money of ₹ 4 per share. These
shares were reissued @ ₹ 8 per share as fully paid-up to Prem.
[Ans.: Capital Reserve—(i) ₹ 1,500; (ii) ₹ 2,400; (iii) ₹ 250.]
68 Rekha holds 100 shares of ₹ 10 each on which she has paid ₹ 1 per share on application.
Sunita holds 200 shares of ₹ 10 each on which she has paid ₹ 1 and ₹ 2 per share on
application and allotment respectively.
Teena holds 300 shares of ₹ 10 each and has paid ₹ 1 on application, ₹ 2 on allotment and ₹
3 on first call. They all fail to pay their arrears and the second call of ₹ 4 per share. Shares are
forfeited and subsequently reissued @ ₹ 11 per share as fully paid-up.
Journalise the above. [Ans.: Capital Reserve—₹ 2,500.]
[Hint: As shares have been reissued at premium, discount allowed on reissue is Nil. Thus,
total amount of ₹ 2,500 credited to Forfeited Shares Account will be transferred to Capital
Reserve.]
69 Record the Journal entries for forfeiture and reissue of shares in the following cases:
(i) Basak Ltd. forfeited 20 shares of ₹ 10 each, ₹ 7 called-up on which the shareholder had
paid application and allotment money of ₹ 5 per share. Out of these, 15 shares were reissued
to Naresh as ₹ 7 per share paid-up for ₹ 8 per share.
(ii) Y Ltd. forfeited 90 shares of ₹ 10 each, ₹ 8 called-up issued at a premium of ₹ 2 per share
to ‘R’ for non-payment of allotment money of ₹ 5 per share (including premium). Out of these,
80 shares were reissued to Sanjay as ₹ 8 called-up for ₹ 10 per share. (Delhi 2013)
[Ans.: Amount transferred to Capital Reserve—(i) ₹ 75; (ii) ₹ 400
Q. 70. Paliwal Exports Ltd. with a share capital of ₹ 10,00,000 divided into 20,000 shares of
₹50 each offers the shares to the public as under :
₹ 15 per share payable on application; ₹ 15 per share payable on allotment; ₹ 10 per share
payable on 1st call; and ₹ 10 per share payable on second call.
Shareholder 'A' who holds 200 shares has paid only the application money.
Shareholder ‘B’ who holds 300 shares has paid only the application and allotment money.
Shareholder ‘C’ who holds 400 shares has paid application, allotment and first call money.
The company forfeits the shares of the above shareholders who have not paid the arrears and
re-issued 600 of these shares at a discount of 20%.
Journalise the above transactions including entries relating to Bank in the books of Paliwal
Exports Ltd.
[Ans. Amount received on allotment ₹2,97,000; on first call ₹ 1,95,000 and on second call ₹
1,91,000. Share Forfeiture Account will be credited by ₹28,000 on forfeiture of shares. Balance
of Share Forfeiture Account ₹22,000.]
Hint: Balance of Share Forfeiture Account will not be transferred to Capital Reserve.
Q. 71 A, who holds 200 shares of ₹100 each, has paid only ₹25 per share as application
money.
B, who holds 300 shares of ₹ 100 each, has paid ₹25 per share on application and ₹30 per
share on allotment.
C, who holds 400 shares of ₹ 100 each, has paid ₹25 per share on application, ₹30 per share
on allotment and ₹20 per share on first call.
They failed to pay their arrears and the final call. Their shares were forfeited and re-issued at
₹95 per share.
Prepare necessary journal entries.
[Ans. Capital Reserve ₹47,000.]
Q. 72. Narmada Limited was registered with an Authorised Capital of ₹5,00,000 in ₹ 10 shares.
Company purchased an Asset for ₹2,00,000 and issued fully paid shares for it. Balance 30,000
shares were issued to the public, payable as follows :
On Application & Allotment ₹3
On First Call ₹4
On Second Call ₹3
Govind, holding 100 shares failed to pay the First Call money and his shares were forfeited
after the First Call.
Gopal, holding 200 shares failed to pay the Second Call and his shares were also forfeited.
Pass Journal Entries.
[Ans. Share Forfeiture A/c ₹300 + ₹1,400 = ₹1,700.]
Q. 73(A). Virender Limited forfeited 400 shares of ₹ 100 each (₹60 called-up) issued at par to
Mukesh on which he had paid ₹25 per share. Out of these, 300 shares were re-issued to
Sanjeev as ₹60 paid-up for ₹45 per share. Pass entries for forfeiture and re-issue of shares.
(B). The Directors of Devendra Ltd. resolved on 1st April, 2023 that 1,000 equity shares of ₹
10 each, ₹ 8 per share called-up be forfeited for non-payment of first call of ₹2 per share. On
1st May, 2023, 600 of these shares were re-issued at ₹7 per share fully paid-up. Pass entries
for forfeiture and re-issue of shares.
[Ans. (A) Capital Reserve ₹3,000. (B) Capital Reserve ₹ 1,800.]
Q. 74. Y Ltd. invited applications for issuing 15,000 equity shares of ₹ 10 each on which ₹6
per share were called up, which were payable as follows:
On application ₹2 per share
On allotment ₹ 1 per share
On first call ₹3 per share
The issue was fully subscribed and the amount was received as follows :
On 10,000 shares — ₹6 per share
On 3,000 shares — ₹3 per share
On 2,000 shares — ₹2 per share
The directors forfeited those shares on which less than ₹6 per share were received. The
forfeited shares were re-issued at ₹9 per share, as ₹6 per share paid up.
Pass necessary journal entries for the above transactions in the books of the company.
(C.B.S.E. 2015)
[Ans. Amount received on allotment ₹ 13,000; Amount received on first call ₹30,000; Capital
Reserve ₹ 13,000.]
Forfeiture and Reissue of Shares which were issued at Premium
75. A share of ₹ 100 issued at a premium of ₹ 10 on which ₹ 80 (including premium) was
called and ₹ 60 (including premium) was paid, has been forfeited. This share was afterwards
reissued as fully paid-up for ₹ 70. Give Journal entries to record the above.
[Ans.: Capital Reserve—₹ 20.]
76. Pass Journal entries in the following cases:
NK Ltd. forfeited 200 Equity Shares of ₹ 10 each, issued at a premium of ₹ 5 per share, held
by Ram for non-payment of the final call of ₹ 3 per share. Of these, 100 shares were reissued
to Vishu at a discount of ₹ 4 per share. [Ans.: Capital Reserve—₹ 300.]
77. The Directors of a company forfeited 300 shares of ₹ 10 each issued at a premium of ₹ 3
per share, for the non-payment of the first call money of ₹ 2 per share. The final call of ₹ 2 per
share has not been made. Half the forfeited shares were reissued at ₹ 1,500 as fully paid-up.
Record the Journal entries for the forfeiture and reissue of shares. (Foreign & Delhi2009)
[Ans.: Capital Reserve—₹ 900.]
78. X Ltd. forfeited 100 shares of ₹ 10 each (₹ 8 called-up) issued at a premium of ₹ 2 per
share to Rahul on which he had paid application money of ₹ 5 per share, for non-payment of
allotment money of ₹ 5 per share (including premium). Out of these, 70 shares were reissued
to Sanjay for ₹ 7 per share as ₹ 8 called-up for ₹ 7 per share. Give necessary Journal entries
relating to forfeiture and reissue of shares.
[Ans.: Capital Reserve—₹ 280.]
79 150 shares of ₹ 10 each issued at a premium of ₹4 per share payable with allotment were
forfeited for non-payment of allotment money of ₹ 8 per share including premium. The first and
final call of ₹ 4 per share was not made. The forfeited shares were reissued at ₹ 15 per share
fully paid-up.
Pass Journal entries in the books of X Ltd. for the above. (NCERT, Modified)
[Ans.: Capital Reserve—₹ 300.]
80 JCV Ltd., forfeited 200 shares of ₹ 10 each issued at a premium of ₹ 2 per share for the
non-payment of allotment money of ₹ 3 per share (including premium). The first and final call
of ₹ 4 per share has not been made as yet. 50% of the forfeited shares were reissued at ₹ 8
per share as fully paid-up. Pass necessary Journal entries for the forfeiture and reissue of
shares. (Delhi 2011 C)
[Ans.: Capital Reserve—₹ 300.]
81. Pass necessary Journal entries in the books of the company for the following transactions:
Vishesh Ltd. forfeited 1,000 Equity Shares of ₹ 10 each issued at a premium of ₹ 2 per share
for non-payment of allotment money of ₹5 per share including premium. The final call of ₹2
per share was not yet called on these shares. Of the forfeited shares 800 shares vyere
reissued at ₹ 12 per share as fully paid-up. The remaining shares were reissued at ₹ 11 per
share fully paid-up. (Delhi 2013 c)
[Ans.: Capital Reserve—₹ 5,000.]
82. Gaurav applied for 5,000 shares of ₹ 10 each at a premium of 2.50 per share. But he was
allotted 2,500 shares on pro rata basis. After having paid ₹ 3 per share on application, he did
not pay allotment money of ₹ 4.50 per share (including premium) and on his subsequent failure
to pay the first call of ₹ 2 per share, his shares were forfeited. These shares were reissued at
the rate of ₹ 8 per share credited as fully paid.
Pass Journal entries to record the forfeiture and reissue of shares.
[Ans.: Allotment money due but not received—₹ 3,750;
Forfeited Shares A/c Credited—₹ 12,500; Capital Reserve—₹ 7,500.]
83. Amal had applied for 7,000 shares of ₹ 10 each at a premium of ₹ 5 per share. He was
allotted 4,000 shares on pro rata basis. After having paid ₹ 3 per share on application, he did
not pay allotment money of ₹ 7 per share (including premium) and on his subsequent failure
to pay the first call of ₹ 3 per share, his shares were forfeited. Calls not received were
transferred to Calls-in-Arrears Account. These shares were reissued at the rate of ₹ 8 per
share credited as fully paid.
Pass Journal entries to record the forfeiture and reissue of shares.
[Ans.: Allotment money due but not received—₹ 19,000;
Forfeited Shares A/c Credited— ₹ 21,000; Capital Reserve— ₹ 13,000.]
84 'Telecom Ltd.' issued 20,000 Equity Shares of ₹ 10 each at a premium of ₹ 5 per share,
payable as: ₹ 7 (including premium) on application, ₹ 5 on allotment and the balance after
three months of allotment. A shareholder to whom 200 shares were allotted failed to pay the
allotment and call money and his shares were forfeited. 160 of the forfeited shares were
reissued for ₹ 1,600.
Pass necessary entries in company's Journal, prepare Ledger Accounts and the Balance
Sheet.
[Ans.: Balance of Forfeited Shares A/c—₹ 80; Capital Reserve—₹ 320; Balance Sheet
Total—₹ 3,00,000.]
Q. 85. Give journal entries for forfeiture and re-issue of shares :
(a) X Ltd. forfeited 500 shares of ₹100 each, ₹75 called-up, issued at 10% premium (to be
paid at the time of allotment) for non-payment of a first call of ₹20 per share. Out of these, 200
shares were re-issued as ₹75 paid-up for ₹60 per share.
(b) X Ltd. forfeited 300 shares of ₹ 100 each, ₹75 called-up, issued at 10% premium (to be
paid at the time of allotment) for non-payment of allotment money of ₹30 per share (including
premium) and first call of ₹20 per share. Out of these, 100 shares were re-issued as fully paid-
up in such a way that ₹3,100 were transferred to capital reserve.
[Ans. (a) Capital Reserve ₹8,000; (b) Re-issue Price ₹96 per share.
Q. 86. Journalise the following :
(a) Y Ltd. forfeited 400 shares of ₹ 100 each, issued at a premium of ₹5 per share (to be paid
at the time of allotment) for non-payment of a first call of ₹20 per share. The second and final
call of ₹20 has not yet been called. Out of these, 100 shares were re-issued as fully paid-up
for ₹110 per share.
(b) Y Ltd. forfeited 700 shares of ₹ 100 each, issued at a premium of ₹5 per share for non-
payment of allotment money of ₹35 per share (including premium) and first call of ₹20 per
share. The second and final call of ₹20 has not yet been called. 500 of these shares were re-
issued as ₹80 paid-up for ₹92 per share.
[Ans. Capital Reserve (a) ₹6,000; (b) ₹ 15,000.]
Q. 87. Journalise the following transactions in the books of Poonam Ltd. :
200 shares of ₹10 each issued at a premium of ₹5 each payable with allotment were forfeited
for the non payment of allotment money of ₹8 per share including premium. The first and final
call on these shares at ₹3 per share was not made. The forfeited shares were re-issued @
₹12 per share fully paid up.
[Ans. Transfer to Capital Reserve A/c : ^ 800 ]
Q. 88. Prayuj Ltd. forfeited 2,000 shares of ₹ 10 each, fully called up, on which they had
received only ₹ 14,000. Out of forfeited shares 50 shares were reissued for ₹9 per share fully
paid up.
Pass necessary journal entries for forfeiture and re-issue of shares. Also prepare share
forfeited account. (C.B.S.E. 2017, Comptt. Delhi)
[Ans. Amount transferred to Capital Reserve ₹300.]

89 Healthy Foods Ltd. had authorised capital of ₹ 50,00,000,5,00,000 equity shares of ₹ 10

each issued 3,75,000 equity shares for subscription at a premium of 20% payable ₹ 4 on
application, ₹ 5 on allotment and balance as first and final call. The shares were subscribed,
and due amounts were received except allotment money on 25,000 shares. These shares
were forfeited. Later these shares were reissued at ₹ 7 paid-up and ₹ 50,000 were transferred
to Capital Reserve. First and final call was demanded from the shareholders and was received
except on 10,000 which was transferred to Calls-in-Arrears Account.
Pass the Journal entries for forfeiture, reissue of forfeited shares and first and final call.
[Ans.: Amount received on reissue of shares—₹ 1,25,000.]
90. Panasonic Ltd. was formed on 1st April, 2010 with an authorised capital of ₹ 2,00,000,
divided into 2,000 Equity Shares of ₹ 100 each. 1,000 shares were issued as fully paid to the
vendors of building for payment of the purchase consideration. The remaining 1,000 shares
were offered for public subscription at a premium of ₹ 5 per share payable as:
On Application ₹ 10 per share,
On Allotment ₹ 25 per share (including premium),
On First Call ₹ 40 per share,
On Final Call ₹ 30 per share.
Applications were received for 900 shares which were duly allotted and the allotment money
was received in full. At the time of the first call, a shareholder who held 100 shares failed to
pay the first call money and his shares were forfeited. These shares were reissued @ ₹ 60
per share, ₹ 70 per share paid-up. Final call has not been made.
You are required to (i) give necessary Journal entries to record the above transactions and (ii)
show how share capital would appear in the Balance Sheet of the company.
[Ans.: Capital Reserve—₹ 2,000; Balance Sheet Total—₹ 1,69,500.]
91 VXN Ltd. invited applications for issuing 50,000 equity shares of ₹ 10 each at a premium
of ₹ 8 per share. The amount was payable as follows:
On Application — ₹ 4 per share (Including ₹ 2 premium);
On Allotment — ₹ 6 per share (Including₹ 3 premium);
On First Call — ₹ 5 per share (Including ₹ 1 premium); and
On Second and Final Call — Balance Amount.
The issue was fully subscribed. Gopal, a shareholder holding 200 shares, did not pay the
allotment money and Madhav, a holder of 400 shares, paid his entire share money along with
the allotment money. Gopal's shares were immediately forfeited after allotment. Afterwards,
the first call was made. Krishna, a holder of 100 shares, failed to pay the first call money and
Girdhar, a holder of 300 shares, paid the second call money also along with the first call.
Krishna's shares were forfeited immediately after the first call. Second and final call was made
afterwards and was duly received. All the forfeited shares were reissued at ₹ 9 per share fully
paid-up.
Pass necessary Journal entries for the above transactions in the books of the company.
(OD 2017)
[Ans.: Amount Forfeited (after Allotment)—₹ 400; Amount forfeited (after First Call)—₹ 500;
Amount transferred to Capital Reserve—₹ 600; Money Received on Allotment—₹ 3,02,000.]
92. Sukanya Ltd. invited applications for issuing 1,00,000 equity shares of₹ 10 each. The
shares were issued at a premium of ₹ 20 per share. The amount was payable as follows:
On Application and Allotment — ₹ 14 per share (including premium of ₹ 10),
On First Call — ₹ 8 per share (including premium of ₹ 5),
On Final Call — ₹ 8 per share (including premium of ₹ 5).
Applications for 96,000 shares were received. Rohit, a shareholder holding 7,000 shares,
failed to pay both the calls and Namit, a holder of 5,000 shares, did not pay the final call.
Shares of Rohit and Namit were forfeited. Of the forfeited shares, 8,000 shares including all
the shares of Rohit were reissued to Reena at ₹ 8 per share fully paid-up.
Pass necessary Journal entries for the above transactions in the books of Sukanya Ltd.
(OD 2016 c)
[Ans.: Capital Reserve—₹ 19,000.]
93. Abhipra Ltd. invited applications for issuing 1,00,000 equity shares of ₹ 10 each. The
shares were issued at a premium of ₹ 20 per share. The amount was payable as follows:
On Application — ₹ 14 per share (including premium of ₹ 10),
On Allotment — ₹ 8 per share (including premium of ₹ 5)
On First and Final Call — ₹ 8 per share (including premium of ₹ 5).
Applications for 90,000 shares were received. Paresh, a shareholder holding 5,000 shares,
did not pay the allotment money and call. While Dharam, holder of 3,000 shares, did not pay
the call. Shares of Paresh and Dharam were forfeited. Of the forfeited shares, 5,000 shares
including 3,000 shares of Paresh and 2,000 shares of Dharam were reissued to Parul at ₹ 8
per share as fully paid-up.
Pass necessary Journal entries for the above transactions in the books of Abhipra Ltd.
[Ans.: Capital Reserve—₹ 16,000.]
Q. 94. A Co. Ltd. offered to the public 20,000 equity shares of ₹ 100 each at a premium of ₹
10 per share. The payment was to be as follows :
On Application ₹30 per share
On Allotment ₹30 per share (including premium)
On First Call ₹25 per share
On Second & Final Call ₹25 per share
Applications were received for 35,000 shares. Applications for 10,000 shares were rejected.
Applicants for 15,000 shares were allotted 10,000 shares and remaining applications were
accepted in full. The Directors made both the calls. One shareholder holding 500 shares failed
to pay the two calls and as a consequence his shares were forfeited. 200 of these shares were
re-issued as fully paid at f 80 per share.
Expenses of issue came to ₹ 10,000.
Prepare Cash Book and Journal on the basis of information given above. Also show the Share
Capital in the Balance Sheet of the Company.
[Ans. Cash at Bank ₹21,81,000; Capital Reserve ₹6,000; Subscribed and Fully Paid Capital ₹
19,70,000.]
Hint: Expenses of issue have been written off against Securities Premium A/c.
Q. 95. AXN Ltd. invited applications for issuing 1,00,000 equity shares of ₹10 each at a
premium of ₹6 per share. The amount was payable as follows :
On Application ₹4 per share (including ₹2 premium)
On Allotment ₹5 per share (including ₹2 premium)
On First Call ₹4 per share (including ₹2 premium)
On Second and Final Call Balance Amount.
The issue was fully subscribed.
Kumar, the holder of 400 shares did not pay the allotment money and Ravi the holder of 1,000
shares paid his entire share money alongwith allotment money. Kumar’s shares were forfeited
immediately after allotment. Afterwards first call was made. Gupta, a holder of 300 shares
failed to pay the first call money and Gopal a holder of 600 shares paid the second call money
also alongwith first call. Gupta’s shares were forfeited immediately after the first call. Second
and final call was made afterwards. The whole amount due on second call was received.
All the forfeited shares were re-issued at ₹9 per share fully paid up.
Pass necessary Journal Entries for the above transactions in the books of the company.
(C.B.S.E. 2017, Delhi)
[Ans. Forfeited amount in respect of Kumar’s shares ₹800; Forfeited amount in respect of
Gupta’s shares ₹ 1,500; Amount transferred to Capital Reserve ₹ 1,600]

Over-Subscription and Forfeiture of Shares

96. Alfa Ltd. invited applications for issuing 75,000 equity shares of ₹ 10 each. The amount
was payable as follows:
On Application and Allotment — ₹ 4 per share,
On First Call — ₹ 3 per share,
On Second and Final Call — balance.
Applications for 1,00,000 shares were received. Shares were allotted to all the applicants on
pro rata basis and excess money received with applications was transferred towards sums
due on first call. Vibha who was allotted 750 shares failed to pay the first call. Her shares were
immediately forfeited. Afterwards the second call was made. The amount due on second call
was also received except on 1,000 shares applied by Monika. Her shares were also forfeited.
All the forfeited shares were reissued to Mohit for ₹ 9,000 as fully paid-up.
Pass necessary Journal entries in the Books of Alfa Ltd. for the above transactions.
(Delhi 2015)
[Ans.: Capital Reserve—₹ 3,250.]
97 Himalaya Company Limited issued for public subscription 1,20,000 equity shares of₹ 10
each at a premium for ₹ 2 per share payable as under:
On Application — ₹ 3 per share,
On Allotment (including premium) — ₹ 5 per share,
On First call — ₹ 2 per share,
On Second and Final call — ₹ 2 per share.
Applications were received for 1,60,000 shares. Allotment was made on pro rata basis. Excess
money on application were adjusted against the amount due on allotment.
Rohan to whom 4,800 shares were allotted, failed to pay for the two calls. These shares were
subsequently forfeited after the second call was made. All the shares forfeited were reissued
to Teena as fully paid at ₹ 7 per share. Record Journal entries and show the transactions
relating to share capital in the company's Balance Sheet. (NCERT)
[Ans.: Capital Reserve—₹ 14,400; Balance Sheet Total—₹ 14,54,400.]
98 SaReGaMa Ltd. invited applications for issuing 80,000 equity shares of ₹ 100 each at a
premium of ₹ 10. The amount was payable as follows:
On Application — ₹ 30
On Allotment — ₹30 (including a premium of ₹ 10)
On First Call — ₹ 30
On Final Call — Balance
Applications of 1,20,000 shares were received. Allotment was made on pro rata basis to all
applicants. Excess money received on application was adjusted on sums due on allotment.
Dhwani, who was allotted 1,600 shares, failed to pay allotment money and Sargam who
applied for 6,000 shares did not pay first call money. These shares were forfeited immediately
after first call. 2,000 of these shares (including all shares of Dhwani were issued to Tarang for
₹ 95 per share as₹ 80 paid-up. Pass necessary Journal entries in books of Saregama Ltd. by
opening Calls-in-Arrear and Calls-in-Advance Accounts, if final call has not been made.
(CBSE Sample Paper 2019)
[Ans.: Amount transferred to Capital Reserve—₹ 92,000.]
99 Jeevan Dhara Ltd. invited applications for issuing 1,20,000 equity shares of ₹ 10 each at a
premium of ₹ 2 per share. The amount was payable as follows:
On Application — ₹ 2 per share,
On Allotment — ₹ 5 per share (Including premium),
On First and Final Call — Balance.
Applications for 1,50,000 shares were received. Shares were allotted to all the applicants on
prorata basis. Excess money received on applications was adjusted towards sums due on
allotment. All calls were made. Manu who had applied for 3,000 shares failed to pay the
amount due on allotment and first and final call. Madhur who was allotted 2,400 shares failed
to pay the first and final call. Shares of both Manu and Madhur were forfeited. The forfeited
shares were reissued at ₹ 9 per share as fully paid-up.
Pass necessary Journal entries for the above transactions in the books of Jeevan Dhara Ltd.
(Delhi 2015)
[Ans.: Capital Reserve—₹ 13,200.]
100 Sargam Ltd. invited applications for issuing 80,000 equity shares of ₹ 100 each at a
premium.The amount was payable as follows:
On Application — ₹ 20 per share;
On Allotment — ₹ 60 (including premium) per share;
On First and Final Call — ₹ 40 per share.
Applications for 1,20,000 shares were received. Allotment was made on pro rata basis to all
the applicants. Excess money received on applications was adjusted on sums due on
allotment. Sitaram, who had applied for 6,000 shares, failed to pay the allotment money and
Harnam did not pay first and final call on 800 shares allotted to him. The shares of Sitaram
and Harnam were forfeited. 4,200 of these shares were reissued for ₹ 100 per share as fully
paid-up. The reissued shares included all the forfeited shares of Harnam.
Pass necessary Journal entries for the above transactions in the books of Sargam Ltd.
(Delhi 2016 C)
[Ans.: Capital Reserve—₹ 1,50,000.]
101 JJK Ltd. invited applications for issuing 50,000 equity shares of ₹ 10 each at par. The
amount was payable as follows:
On Application — ₹ 2 per share;
On Allotment — ₹ 4 per share; and
On First and Final Call — Balance Amount.
The issue was oversubscribed three times. Applications for 30% shares were rejected and
money refunded. Allotment was made to the remaining applicants as follows:
Category No. of Shares Applied No. of Shares Allotted
I 80,000 40,000
II 25,000 10,000
Excess money paid by the applicants who were allotted shares was adjusted towards the
sums due on allotment.
Deepak, a shareholder belonging to Category I, who had applied for 1,000 shares, failed to
pay the allotment money. Raju, a shareholder holding 100 shares, also failed to pay the
allotment money. Raju belonged to Category II. Shares of both Deepak and Raju were
forfeited immediately after allotment. Afterwards, first and final call was made and was duly
received. The forfeited shares of Deepak and Raju were reissued at ₹ 11 per share fully paid-
up.
Pass necessary Journal entries for the above transactions in the books of the company.
(OD 2017)
[Ans.: Allotment money due but not paid by Deepak—₹ 1,000; by Raju—₹ 100;
Allotment money received—₹ 88,900; Capital Reserve—₹ 2,500.]
102 XYZ Ltd. is registered with an authorised capital of ₹ 2,00,000 divided into 2,000 shares
of ₹ 100 each of which, 1,000 shares were offered for public subscription at a premium of ₹ 5
per share, payable as:
On Application — ₹ 10 per share,
On Allotment — ₹ 25 per share (including premium),
On First Call — ₹ 40 per share,
On Final Call — ₹ 30 per share.
Applications were received for 1,800 shares, of which applications for 300 shares were
rejected outright; the rest of the applications were allotted 1,000 shares on pro rata basis.
Excess application money was transferred to allotment.
All the money was duly received except from Sundar, holder of 100 shares, who failed to pay
allotment and first call money. His shares were later forfeited and reissued to Shyam at ₹ 60
per share ₹ 70 paid-up. Final call has not been made.
Pass necessary Journal entries and prepare Cash Book in the books of XYZ Limited.
(OD 2016)
[Ans.: Capital Reserve—₹ 500.]
103 A Ltd. invited applications for issuing 1,00,000 shares of ₹ 10 each at a premium of ₹ 1
per share. The amount was payable as follows:
On Application — ₹ 3 per share;
On Allotment — ₹ 3 per share (including premium);
On First Call — ₹ 3 per share;
On Second and Final Call — Balance amount.
Applications for 1,60,000 shares were received. Allotment was made on the following basis:
(i) To applicants for 90,000 shares — 40,000 shares;
(ii) To applicants for 50,000 shares — 40,000 shares;
(iii) To applicants for 20,000 shares — Full shares.
Excess money paid on application is to be adjusted against the amount due on allotment and
calls.
Rishabh, a shareholder, who applied for 1,500 shares and belonged to category (ii), did not
pay allotment, first and second and final call money.
Another shareholder, Sudha, who applied for 1,800 shares and belonged to category (i), did
not pay the first and second and final call money.
All the shares of Rishabh and Sudha were forfeited and were subsequently reissued at ₹ 7
per share fully paid. Pass the necessary Journal entries in the books of A Ltd. Open Calls-in-
Arrears Account and Calls-in-Advance Account wherever required. (Delhi and Al 2018)
[Ans.: Capital Reserve—₹ 3,100.]
104 Ruchi Ltd. issued for public subscription 40,000 Equity Shares of ₹ 10 each at a premium
of ₹ 2 per share payable as:
On Application — ₹ 2 per share,
On Allotment — ₹ 5 per share (including premium),
On First Call — ₹ 2 per share,
On Second and Final Call — ₹ 3 per share.
Applications were received for 60,000 shares. Allotment was made on pro rata basis to the
applicants for 48,000 shares, the remaining applications being refused. Money overpaid on
application was utilised towards sums due on allotment. Ram to whom 1,600 shares were
allotted failed to pay the allotment money and Shyam to whom 2,000 shares were allotted
failed to pay the two calls. These shares were subsequently forfeited after the second and
final call was made. All the forfeited shares were reissued as fully paid-up @ ₹ 8 per share.
Give necessary Journal entries for the above transactions. [Ans.: Capital Reserve—₹ 6,640.]
105 Competent Ltd. issued a prospectus inviting applications for 50,000 Equity Shares of ₹
10 each, payable ₹ 5 as per application (including ₹ 2 as premium), ₹ 4 as per allotment and
the balance towards first and final call.
Applications were received for 65,000 shares. Application money received on 5,000 shares
was refunded with letter of regret and allotments were made on pro rata basis to the applicants
of 60,000 shares.
Mr. Sharma to whom 700 shares were allotted failed to pay the allotment money and his
shares were forfeited by the Directors on his subsequent failure to pay the call money.
All the forfeited shares were subsequently sold to Mr. Jain credited as fully paid-up for ₹ 9 per
share.
You are required to set out the Journal entries and the relevant entries in the Cash Book.
[Ans.: Capital Reserve—₹ 2,100.]
106 Janta Ltd. issued applications for 5,00,000 equity shares of ₹ 10 each, at a premium of ₹
4 per share. The amount was payable as follows:
On application ₹ 6 (including ₹ 2 premium), on Allotment ₹ 6 (including ₹ 2 premium) and
Balance on first and final call.
Applications for 7,50,000 shares were received. Allotment was made to all the applicants on
pro rata basis. Mohan to whom 1,000 shares were allotted did not pay allotment and call
money. Vikram to whom 500 shares were allotted, did not pay the call money. These shares
were forfeited and afterwards reissued @ ₹ 8 per share fully paid-up. Pass the necessary
Journal entries. [Ans.: Capital Reserve—₹ 8,000.]

107. Nitro Paints Ltd. invited applications for issuing 1,60,000 equity shares of ₹ 10 each at a
premium of ₹ 3 per share. The amount was payable as follows:
On Application — ₹ 6 per share (Including premium ₹ 1);
On Allotment — ₹ 3 per share (Including premium ₹ 1); and
The balance — on First and Final call.
Applications for 1,80,000 shares were received. Applications for 10,000 shares were rejected
and pro rata allotment was made to the remaining applicants. Over payment received on
application was adjusted towards sums due on allotment. All calls were made and were duly
received except allotment and final call from Aditya who was allotted 3,200 shares. His shares
were forfeited. Half of the forfeited shares were reissued for ₹ 43,000 as fully paid-up.
Pass necessary Journal entries for the above transactions in the books of Nitro Paints Ltd.
(Delhi 2017 C)
[Ans.: Amount forfeited—₹ 17,200; Amount transferred to Capital Reserve—₹ 8,600.]
108. Raja Ltd. invited applications for issuing 50,000 Equity Shares of ₹ 10 each. The amount
was payable as follows:
On Application — ₹ 3 per share,
On Allotment — ₹ 5 per share, and
On First and Final Call — Balance.
Applications for 70,000 shares were received. Allotment was made to all applicants on pro
rata basis. Excess money received on application was adjusted towards sums due on
allotment. Ramesh, who had applied for 700 shares, did not pay the allotment money and on
his failure to pay the allotment money his shares were forfeited. Afterwards, the first and final
call was made. Adhar, who had been allotted 500 shares, did not pay the first and final call.
His shares were also forfeited. Out of the forfeited shares 900 shares were reissued at₹ 8 per
share as fully paid-up. The reissued shares included all the shares of Ramesh.
Pass necessary Journal entries for the above transactions in the books of the company.
(Delhi 2013 C)
[Ans.: Amount due but not received from Ramesh on allotment—₹ 1,900; Allotment money
received later—₹ 1,88,100; Amount transferred to Capital Reserve—₹ 3,500.]
109. XYZ Ltd. invited applications for issuing 50,000 Equity Shares of ₹ 10 each. The amount
was payable as:
On Application — ₹ 3 per share,
On Allotment — ₹ 4 per share,
On First and Final Call — ₹ 3 per share.
Applications were received for 75,000 shares and pro rata allotment was made as:
Applicants for 40,000 shares were allotted 30,000 shares on pro rata basis.
Applicants for 35,000 shares were allotted 20,000 shares on pro rata basis.
Ramu, to whom 1,200 shares were allotted out of the group applying for 40,000 shares, failed
to pay the allotment money. His shares were forfeited immediately after allotment.
Shamu, who had applied for 700 shares out of the group applying for 35,000 shares, failed to
pay the first and final call. His shares were also forfeited. Out of the forfeited shares, 1,000
shares were reissued @ ₹ 8 per share as fully paid-up. The reissued shares included all the
forfeited shares of Shamu.
Pass necessary Journal entries to record the above transactions.
[Ans.: Money not paid by Ramu on Allotment—₹ 3,600; Money Received on Allotment — ₹
1,21,400 and Amount transferred to Capital Reserve—₹ 3,200.]
110. Konark Ltd. invited applications for issuing 3,00,000 shares of ₹ 10 each. The amount
per share was payable as follows: ₹ 3 on application, ₹ 3 on allotment, and ₹ 4 on first and
final call.
The company received applications for 4,00,000 shares. Allotment was done as follows:
(i) Applicants of 2,40,000 shares were allotted 2,00,000 shares.
(ii) Applicants of 1,20,000 shares were allotted 80,000 shares.
(iii) Remaining applicants were allotted 20,000 shares.
Money overpaid on applications was adjusted towards sums due on allotment. Divij, a
shareholder, belonging to group (ii), who had applied for 6,000 shares, failed to pay allotment
and call money, Faisal, another shareholder, who was allotted 10,000 shares, paid the call
money along with allotment. Faisal belonged to group (i),
Divij's shares were forfeited after the first and final call. Half of the forfeited shares were
reissued @ ₹ 10 per share fully paid.
Pass the necessary Journal entries to record the above transactions in the books of the
company. (CBSE2020)
[Ans.: Allotment Amount received—₹ 5,94,000; Capital Reserve—₹ 9,000.]
111. Max Ltd. invited applications for 2,00,000 Equity Shares of ₹ 10 each to be issued at 20%
premium. The money payable per share was: on application ₹ 5, on allotment ₹ 4 (including
premium of ₹ 2), first call ₹ 2 and final call ₹ 1.
Applications were received for 2,40,000 shares and allotment was made as:
(i) to applicants for 1,00,000 shares—in full,
(ii) to applicants for 80,000 shares—60,000 shares,
(iii) to applicants for 60,000 shares—40,000 shares.
Applicants of 1,000 shares falling in Category (i) and applicants of 1,200 shares falling in
Category (ii) failed to pay allotment money. These shares were forfeited on failure to pay first
call. Holders of 1,200 shares falling in Category (iii) failed to pay the first and final call and
these shares were forfeited after final call.
1,300 shares [1,000 of Category (i) and 300 of Category (ii)] were reissued at ₹ 8 per share
as fully paid-up.
Journalise the above transactions. Prepare Cash Book and Balance Sheet.
[Ans.: Amount forfeited—₹ 11,000 (for Categories i and ii) + ₹ 8,400 (Category iii) = ₹
19,400;
Amount transferred to Capital Reserve—₹ 4,400; Actual amount received on
allotment—₹ 5,93,900; Securities Premium—₹ 3,96,200;
Paid-up capital—₹ 19,94,400; Balance Sheet Total—₹ 23,95,000.]
112. XYZ Ltd. issued a prospectus inviting applications for 2,000 shares of ₹ 10 each at a
premium of ₹ 4 per share, payable as:
On Application — ₹ 6 (including ₹ 1 premium),
On Allotment — ₹ 2 (including ₹ 1 premium),
On First Call — ₹ 3 (including ₹ 1 premium),
On Second and Final Call — ₹ 3 (including ₹ 1 premium).
Applications were received for 3,000 shares and pro rata allotment was made on the
applications for 2,400 shares. It was decided to utilise excess application money towards the
amount due on allotment.
X, to whom 40 shares were allotted, failed to pay the allotment money and on his subsequent
failure to pay the first call, his shares were forfeited.
Y, who applied for 72 shares failed to pay the two calls and on his such failure, his shares
were forfeited.
Of the shares forfeited, 80 shares were sold to Z credited as fully paid-up for ₹ 9 per share,
the whole of Ks shares being included. Prepare Journal, Cash Book and the Balance Sheet.
[Ans.: Capital Reserve—₹ 400; Balance Sheet Total—₹ 28,088.]
Q. 113 A Ltd. offered 25,000 shares of ₹ 100 each payable as ₹25 on application, ₹20 on
allotment, ₹30 on first call and the balance on final call.
Applications were received for 40,000 shares out of which shares were allotted to the
applicants for 35,000 shares on a pro-rata basis. All shareholders paid the allotment money
excepting Mr. Gopal who was allotted 500 shares. These shares were forfeited immediately.
The first call was made thereafter. The forfeited shares were re-issued @ ₹78 per share ₹75
paid up. The final call was not made.
Pass necessary journal entries.
[Ans. Amount received on allotment ₹2,45,000; Capital Reserve ₹ 17,500.]
Q. 114. Jay Ltd. issued a prospectus inviting applications for 1,00,000 shares of 110 each.
These shares were issued at par on the following terms :
On application ₹2.50, on allotment ₹2.50, on first call ₹3 and on final call the balance.
Applications were received for 1,35,000 shares. Allotments were made on the following basis:
(i) To applicants for 25,000 shares — in full;
(ii) To applicants for 60,000 shares — 45,000 shares
(iii) To applicants for 50,000 shares — 30,000 shares
All excess amount paid on application is to be adjusted against amount due on allotment.
The shares were fully called and paid-up except the amount of allotment, first and final call not
paid by those who applied for 4,000 shares of the group applying for 50,000 shares.
All the shares on which calls were not paid were forfeited by the Board of Directors. 1,800
forfeited shares were re-issued as fully paid on receipt of ₹9 per share.
Prepare Cash Book and Journal entries to record the above.
[Ans. Cash received on Allotment ₹ 1,60,500; Bank Balance ₹ 10,02,200; Capital Reserve
₹5,700.]
Q.115. XY Ltd. invited applications for 5,00,000 Equity shares of ₹10 each, payable as ₹3 on
application, ₹4 on allotment and the balance on first and final call. Applications were received
for 12,00,000 shares and the shares were allotted on a pro rata basis. The excess application
money was to be adjusted against allotment only. R, a shareholder, who had applied for 6,000
shares, failed to pay the call money and his shares were accordingly forfeited and reissued at
₹9 per share as fully paid. Pass necessary journal entries.
[Ans. Amount received on 1st & Final Call ₹ 14,92,500; Capital Reserve ₹ 15,000.]
Hints : (i) Shares allotted to R : 2,500.
(ii) There would be no entry for receipt of allotment money.
Over Subscription and Forfeiture of Shares Issued at Premium :
Q. 116 A company issued 10,000 shares of ₹10 each at a premium of ₹ 1 per share, payment
to be made as follows :
₹
On Application 3
On Allotment 4 (including premium)
On First call 2
On Second and final call 2
Applications were received for 20,000 shares. Applications for 5,000 shares were rejected and
allotment was made proportionately to the remaining applicants. The directors made both the
calls and all the money were received, except the allotment, first call and final call on 400
shares, which were subsequently forfeited. Later, 300 of the forfeited shares were re-issued
as fully paid @ ₹15 per share. Give journal entries to record the above.
[Ans. Amount received on allotment ₹24,000; Capital Reserve ₹ 1,350.]
Hint: Securities Premium Account has been debited in the entry of forfeiture because it is
assumed that entire excess application money received on forfeited shares is utilised for share
capital.
Q. 117 Amrit Ltd. issued 50,000 shares of ₹ 10 each at a premium of 20% payable as ₹ 3 on
application, ₹4 on allotment (including premium), X2 on first call and the remaining on second
call.
Applications were received for 80,000 shares and pro-rata allotment was made in the ratio of
3 : 2 and the remaining applicants were sent letters of regret. All moneys due were received
except allotment and first call from Sonu who applied for 1,200 shares. All his shares were
forfeited. The forfeited shares were reissued for ₹9,600. Final call was not made. Pass the
necessary journal entries.
[Ans. Amount received on Allotment ₹ 1,23,000; Capital Reserve ^3,600.]
Hint. Applications rejected : 5,000.
Q. 118 A company issued for public subscription 60,000 equity shares of ₹10 each at a
premium of ₹4 per share, payable as under : ₹4 on Application; ₹5 on Allotment (including
premium), ₹2.50 on First Call and ₹2.50 on Final Call.
Applications were received for 75,000 equity shares. The shares were allotted pro-rata to the
applicants for 70,000 shares, the remaining applications being rejected. Money over-paid on
applications was utilised towards sums due on allotment.
A, to whom 1,200 shares were allotted failed to pay allotment and calls money and B, to whom
1,800 shares were allotted failed to pay two calls. These shares were subsequently forfeited
after the final call was made. All the forfeited shares were sold to Rajesh as fully paid-up at ₹
11 per share.
Prepare Cash Book and journal entries required to record the above transactions.
[Ans. Amount received on Allotment ₹2,54,800; Capital Reserve ₹ 14,600. Bank Balance
₹8,52,800.]
Hint: Premium of ₹4,800 due on A’s shares will be debited in the entry of forfeiture.
Q. 119 Suzuki Limited issued a prospectus inviting applications for 60,000 shares of ₹10 each
at a premium of 30% payable as follows : On Application ₹3.50; On Allotment ₹5.50 (including
premium): On First Call ₹2 and on Second Call ₹2.
Applications were received for 95,000 shares and allotment was made pro-rata to applicants
of 80,000 shares. Money over-paid on applications were employed on account of sums due
on allotment.
X, to whom 1,500 shares were allotted failed to pay the allotment money and on his
subsequent failure to pay the First Call his shares were forfeited. Y, the holder of 2,400 shares
failed to pay the two calls and his shares were forfeited after the Second Call. Of the shares
forfeited, 3,000 shares were sold to Z as fully paid, Z paying ₹8.50 per share, the whole of Ps
share being included.
Give journal entries and prepare Bank Account.
[Ans. Cash received on allotment ₹2,53,500; Capital Reserve ₹ 12,700; Cash at Bank
₹7,83,400.]
Hint: Securities Premium A/c will be debited at the time of forfeiture of X’s shares.]
Q.120. A company issued for public subscription 40,000 equity shares of ₹ 10 each at a
premium of ₹2 per share payable as under :
On Application ₹3 per share
On Allotment ₹4 per share (including premium)
On First Call ₹2 per share
On Second Call ₹3 per share
Applications were received for 70,000 shares. Allotment was made pro-rata to the applicants
for 50,000 shares, the remaining applications being refused. Money overpaid on application
was applied towards sum due on allotment. A, to whom 1,600 shares were allotted failed to
pay the allotment and calls money. B, to whom 2,000 shares were allotted failed to pay the
two calls. The shares of A and B were subsequently forfeited after the second call was made.
3,000 of the forfeited shares were re-issued at ₹8 per share fully paid. The re-issued shares
included all of A’s shares.
Pass journal entries in the books of the company to record the above transactions.
[Ans. Amount received on Allotment ₹ 1,24,800; Capital Reserve ₹7,000.]
Q. 121 Hindustan Steel Ltd. invited applications for 50,000 equity shares of ₹10 each at a
premium of ₹4 per share. The amount was payable as follows :
On Application ₹4 (including premium ₹2)
On Allotment ₹6 (including premium ₹2)
On First and Final Call Balance
Applications for 60,000 shares were received. Allotment was made to all the applicants on
pro-rata basis. Excess application money was adjusted towards sums due on allotment. Ram,
to whom 500 shares were allotted, failed to pay allotment and call money. Shyam, to whom
1,000 shares were allotted, failed to pay the call money. These shares were forfeited. Out of
the forfeited shares 1,200 shares (including all shares of Shyam) were re-issued at 10%
discount as fully paid-up.
Pass the necessary journal entries in the books of the company by opening ‘Calls in Arrears
A/c’ wherever necessary.
[Ans. Amount received on allotment ₹2,57,400; Balance of Share Forfeiture A/c transferred to
Capital Reserve ₹560 + ₹6,000 - ₹ 1,200 = ₹5,360.]
Hint: Entry for the forfeiture of shares :

Share Capital A/c Dr. 15,000

Securities Premium A/c Dr. 1,000

To Calls in Arrear A/c 8,600

To Share Forfeiture A/c 7,400

Q. 122 Ltd. invited applications for issuing 3,20,000 equity shares of ₹10 each at a premium
of ₹5 per share. The amount was payable as follows :
On application — ₹3 per share (including premium ₹ 1 per share)
On allotment — ₹5 per share (including premium ₹2 per share)
On first and final call — Balance.
Applications for 4,00,000 shares were received. Applications for 40,000 shares were rejected
and application money refunded. Shares were allotted on pro-rata basis to the remaining
applicants. Excess money received with applications was adjusted towards sums due on
allotments. Jeevan holding 800 shares failed to pay the allotment money and his shares were
immediately forfeited. Afterwards final call was made. Ganesh who had applied for 2,700
shares failed to pay the final call. His shares were also forfeited. Out of the forfeited shares
1,500 shares were re-issued at ₹8 per share fully paid up. The re-issued shares included all
the forfeited shares of Jeevan.
Assuming that the Company maintains ‘Calls in Arrears Account’ pass necessary Journal
entries for the above transactions in the books of the company. (C.B.S.E. 2016)
[Ans. Amount received on allotment ₹ 14,76,300; Balance of Share Forfeiture Account
transferred to Capital Reserve ₹5,400 - ₹3,000 = ₹2,400.
Hint. Securities Premium A/c will be debited from ₹ 1,600 at the time of forfeiture of Jeevan’s
shares and from ₹4,800 at the time of forfeiture of Ganesh’s shares.
Q. 123 Modem Ltd. issued a prospectus inviting applications for 2,00,000 shares of ₹10 each
at a premium of ₹6 per share, payable as follows :
On Application ₹ 5 (including premium ₹2)
On Allotment ₹5 (including premium ₹2)
On Ist Call ₹3 (including premium f 1)
On Ilnd & Final Call ₹3 (including premium ₹ 1)
Applications were received for 2,60,000 shares and pro-rata allotment was made to the
applicants for 2,50,000 shares. Excess money paid on applications for these shares was
utilised towards allotment.
A, who applied for 1,000 shares, failed to pay the allotment money and his shares were
forfeited after allotment.
B, who applied for 1,500 shares, failed to pay the two calls and his shares were also forfeited.
Of the shares forfeited, 1,800 shares were re-issued as fully paid up for ₹15 per share, the
whole of B’s share being included. Prepare Cash Book and Journal'.
[Ans. Cash at Bank ₹32,12,000; Cash received on allotment ₹7,47,000; Capital Reserve
₹9,750.]
Hint. Securities Premium A/c will be debited from ₹ 1,600 at the time of forfeiture of A’s shares
and from ₹2,400 at the time of forfeiture of B’s shares.]
Q. 124 X Ltd. invited applications for issuing 75,000 equity shares of ₹ 10 each at a premium
of ₹5 per share. The amount was payable as follows :
On application and allotment — ₹9 per share (including premium)
On first and final call — the balance amount.
Applications for 3,00,000 shares were received. Applications for 2,00,000 shares were
rejected and money refunded. Shares were allotted on pro-rata basis to the remaining
applicants. The first and final call was made. The amount was duly received except on 1,500
shares applied by Ravi. His shares were forfeited. The forfeited shares were re-issued at a
discount of ₹4 per share.
Excess application and allotment money can be utilised for calls.
Pass necessary journal entries for the above transactions in the books of X Ltd.
[Ans. Amount received on First and Final Call ₹2,21,625; Capital Reserve ₹3,375.]
Hint: Securities Premium A/c will not be debited at the time of forfeiture of shares.
Q. 125. Ritu Fabrics Ltd. invited applications for issuing 5,00,000 shares of ₹ 10 each at a
premium of ₹4 per share. The amounts were payable as follows:
On Application and Allotment — ₹8 per share.
On First & Final Call — Balance (including premium of ₹4)
Applications were received for 6,50,000 shares and allotment was made as follows :
(/) To applicants for 1,40,000 shares — 100% shares.
(ii) To applicants for 60,000 shares — Nil
(Hi) Balance of the applicants were allotted shares on pro-rata basis.
Excess money received with applications was adjusted towards sums due on first and final
call.
Arushi, who belonged to category (i) and was allotted 6,000 shares and Gunjan, who belonged
to category (iii) and who had applied for 5,000 shares failed to pay the first and final call money.
Their shares were forfeited. 60% of forfeited shares of Arushi and Gunjan were re-issued at a
discount of ₹ 1 per share fully paid-up.
Pass necessary journal entries for the above transactions in the books of the company.
[Ans. Amount received on First and Final Call ₹22,28,000; Capital Reserve ₹46,800.]
Q. 126 A limited company forfeited 400 shares of Mr. X, who had applied for 600 shares on
account of non-payment of allotment money ₹3 + ₹2.50 (premium) and first call ₹2. Only ₹4
per share was received with application. Out of these, 200 shares were re-issued to Mr. Yat
₹8 per share, ₹9 paid-up.
Give journal entries relating to forfeiture and re-issue.
[Ans. Capital Reserve ₹ 1,000.]
Q. 127 X Ltd. forfeited 1,500 shares of ₹ 10 each (originally issued at a premium of ₹3 per
share which was payable along with application money) on which allotment money of ₹3 and
first call money of ₹2 were not received; the final call money of ₹3 is not yet called. These
shares were originally allotted on pro-rata basis in the ratio of 3 : 2. These shares were
subsequenty reissued at a discount of ₹ 1 per share, credited as ₹7 paid up.
Pass necessary Journal entries for forfeiture and reissue of shares.
[Ans. Amount transferred to Capital Reserve ₹5,250.]
Q.128. X Ltd. invited applications for 4,00,000 shares of ₹10 each. The shares were issued at
a premium of ₹7 per share. The amount was payable as follows :
On Application & Allotment : ₹9 per share (including premium ₹4)
On First & Final Call : The balance amount (including premium)
Applications were received for 5,70,000 shares and the allotment was made as under :
(i) To applicants for 3,50,000 shares : 2,50,000 shares on pro-rata basis
(II) TO applicants for 2,00,000 shares : 1,50,000 shares on pro-rata basis
(iii) To applicants for 20,000 shares : NIL
Excess application and allotment money could be utilized for calls.
A, who belonged to the first category and was allotted 500 shares, failed to pay the first call
money. B, who belonged to the second category and was allotted 300 shares also failed to
pay the first call money. Their shares were forfeited and were re-issued @ ₹ 15 per share fully
paid-up.
Pass necessary-Cash-Book and Journal entries.
[Ans. Cash received on first call ₹ 18,46,300; Capital Reserve ₹6,700; Cash at Bank
₹68,08,300.]
Note. It has been assumed that the entire excess application and allotment money is
exclusively for share capital and hence ‘Securities Premium Account’ has been debited in the
entry for forfeiture.
Q. 129 Meena Ltd. issued 30,000 shares of ₹ 10 each at a premium of ₹2 per share payable
as ₹3 on application, ₹5 (including premium) on allotment and the balance on first and final
call. Applications were received for 52,000 shares. The directors resolved to allot as follows :
(A) Applicants of 20,000 shares 10,000 shares
(B) Applicants of 30,000 shares 20,000 shares
(C) Applicants of 2,000 shares Nil
Balu who had applied for 4,000 shares in category A and Ganesh who was allotted 2,000
shares in category B failed to pay the allotment money. Calculate the amount received on
allotment.
[Ans. Amount received on Allotment ₹79,000]
Q. 130. X Ltd. invited applications for 40,000 shares of ₹10 each at 5% premium, payable as
₹3 on application, ₹3.50 on allotment (including premium) and balance on first and final call.
Applications were received for 90,000 shares and allotment was made on pro-rata basis. The
excess money received on application was to be adjusted against allotment only. A
shareholder who applied for 4,500 shares, could not pay the call money and his shares were
accordingly forfeited.
Pass necessary journal entries and show the items in company’s Balance Sheet.
[Ans. Amount credited to Share Forfeiture Account on forfeiture of shares ₹ 12,000.]
Q. 131 Durga Ltd. invited applications for issuing 1,00,000 equity shares of ₹10 each at par.
The amount was payable as follows :
On Application ₹2 per share.
On Allotment ₹3 per share.
On First and Final Call ₹5 per share.
Applications were received for 2,80,000 shares. Applications for 30,000 shares were rejected
and the money refunded. Allotment was made to the remaining applicants as follows.
Category No. of Shares Applied No. of Shares Allotted
I 1,50,000 85,000
 II 1,00,000 15,000
Excess money received with applications was adjusted towards sums due on allotment and
first and final call. All calls were made and were duly received except the final call by a
shareholder belonging to Category I who has applied for 300 shares. His shares were forfeited.
The forfeited shares were re-issued at a premium of 30% fully paid up.
Pass necessary Journal entries for the above transactions in the book of Durga Ltd. Open
calls in-arrears and calls in advance account wherever required.
[Ans. Net amount received on allotment ₹ 1,25,000; Net amount received on final call
₹4,24,150; Capital Reserve ₹850.]
Hint: Excess application money transferred to Share Allotment A/c : ₹ 1,75,000
Excess application money transferred to Calls in Advance A/c : ₹75,000
Excess application money returned ₹ 1,10,000 Calls in Arrears ₹850.
Q. 132 Piyush Ltd. invited applications for issuing 1,00,000 shares of ₹10 each payable as
follows:
₹4 — per share on application
₹2 — per share on allotment
Balance on first and final call.
Applications were received for 1,60,000 shares. Full allotment was made to the applicants of
10,000 shares. The remaining applicants were allotted 90,000 shares on pro-rata basis.
Excess money received with application was adjusted towards sums due on allotment and
call.
Kanika, holding 6,000 shares, who belonged to the category of applicants to whom full
allotment was made, paid the call money at the time of allotment. Ruchi, who belonged to the
category of applicants to whom shares were allotted on pro-rata basis did not pay anything
after application on her 600 shares. Ruchi’s shares were forfeited after the first and final call.
These shares were later reissued at ₹9 per share fully paid up.
Pass the necessary journal entries for the above transactions by opening calls in arrears and
calls in advance account wherever necessary.
[Ans. Amount received on first & final call ₹3,14,000; Calls in Arrear ₹2,000; Capital Reserve
₹3,400]
Hints : (i) Excess application money transferred to Calls in Advance A/c : ₹60,000

(ii) ₹

Amount due from Ruchi on First and Final Call = 600 x ₹4 = 2,400

Less : Calls in Advance from Ruchi 400

Amount not paid by Ruchi on First & Final Call 2,000

Utilisation of excess application money for Securities Premium

Q. 133 Khushboo Ltd. issued for Public subscription 50,000 equity shares of ₹ 10 each at a
premium of 30% payable as under :
₹4 on application
₹5 on allotment (including premium)
₹4 on first & final call
Applications were received for 1,00,000 shares. Allotment was made pro-rata to the applicants
for 80,000 shares, the remaining applications being refused. Money overpaid on application
was utilised towards sums due on allotment.
Chatterjee, to whom 1,000 shares were allotted, failed to pay the allotment and call money
and the shares were subsequently forfeited. Half of the forfeited shares were reissued as fully
paid at a discount of 10%. Show the journal entries to record the above transactions.
[Ans. Amount received on allotment ₹ 1,27,400; Capital Reserve ₹2,500.]
Hints :
(i) Out of excess application money of ₹2,400, the amount of ₹2,000 is a part of share capital
and balance of ₹400 is a part of securities premium.
(ii) Entry for forfeiture of shares :
Equity Share Capital A/c Dr. 10,000
Securities Premium A/c (3,000 - 400) Dr. 2,600
To Equity Share Allotment A/c 2,600
To Equity Share First & Final Call A/c 4,000
To Share Forfeiture A/c 6,000
(Refer Illustration 74 for Solution)
Q. 134. Kochi Silk Ltd. issued a prospectus inviting applications for 40,000 shares of ₹ 10 each
at a premium of ₹8 per share, payable as follows :
On Application ₹6 (including ₹2 premium)
On Allotment ₹6 (including ₹2 premium)
On First Call ₹3 (including ₹2 premium)
On Second & Final Call ₹3 (including ₹2 premium)
Applications were received for 80,000 shares and pro-rata allotment was made on the
applications for 70,000 shares. It was decided to utilise excess application money towards the
sums due on allotment.
X; to whom 1,200 shares were allotted, failed to pay the allotment money and on his
subsequent failure to pay the first call his shares were forfeited.
Y, who applied for 3,500 shares failed to pay the two calls and on his such failure, his shares
were also forfeited.
Of the shares forfeited, 2,500 shares were reissued as fully paid up for ₹9 per share, the whole
of Fs shares being included. Prepare Cash Book and Journal entries.
[Ans. Cash at Bank ₹7,21,500; Net amount received on allotment ₹58,200; Capital Reserve ₹
17,500.]
Hints :
(i) Out of excess application money of ₹5,400, an amount of ₹4,800 is a part of share capital
and the balance of ₹600 is a part of securities premium.
(ii) Entry for forfeiture of X’s shares :
Share Capital A/c (1,200 × ₹9) Dr. 10,800
Securities Premium A/c
(1,200 × ₹4 = ₹4,800 - ₹600) Dr. 4,200
To Share Allotment A/c 1,800
To Share First Call A/c 3,600
To Share Forfeiture A/c 9,600
(Refer Illustration 7-5 for Solution)
Q. 135 Sun Ltd. issued shares of ₹50 each at a premium of 20% payable as follows:
On Application ₹15
On Allotment ₹25 (including premium)
On First & Final Call ₹20
Dev, who applied for 2,500 shares and to whom 1,000 shares were allotted on prorata basis,
did not pay allotment and first & final call and his shares were forfeited. Pass entry for forfeiture
of shares.
[Ans. Amount credited to Share Forfeiture Account ₹30,000.)
Hint. Security Premium A/c will be debited by ₹2,500 in the entry for forfeiture of shares.
(Refer Illustration 76 for Solution)
Q. 136 Jupiter Ltd. issued shares of ₹ 100 each at a premium of 40% payable as follows :
On Application ₹50
On Allotment ₹70 (including premium)
On First & Final Call ₹20
Vinita, who applied for 700 shares and to whom 400 shares were allotted-on prorata basis did
not pay allotment and her shares were immediately fofeited. Pass entry for forfeiture of shares.
[Ans. Amount credited to Share Forfeiture Account ₹32,000.]
Hint: Securities Premium A/c will be debited by ₹ 13,000 in the entry for forfeiture of shares.
Disclosure of Share Capital in Company's Balance Sheet
137. Hi-tech Ltd. was registered with an authorised capital of ₹ 50,00,000 divided into
Equity Shares of ₹ 100 each. The company offered for public subscription all the
shares. Applications were received for 45,000 shares and allotment was made to all
the applicants. All the calls were made and were duly received except the final call of
₹ 20 per share on 500 shares.
Prepare the Balance Sheet of the company showing the Share Capital.
138. Farm Products Ltd. has authorised share capital of ₹ 50,00,000 divided into
5,00,000 Equity Shares of ₹ 10 each. It has existing issued and paid-up capital of₹
5,00,000. It further issued to public 1,50,000 Equity Shares at par for subscription
payable as under:
On Application ₹3,
On Allotment ₹4, and
On Call Balance Amount.
The issue was fully subscribed and allotment was made to all the applicants. Call was
made during the year and was duly received.
Show Share Capital in the Balance Sheet of the company.
139. Global Trade Ltd. has authorised share capital of ₹ 1,00,00,000 divided into
1,00,000 Equity Shares of₹ 100 each. It has existing issued and paid-up capital of ₹
25,00,000. It further issued to public 25,000 Equity Shares at a premium of 20% for
subscription payable as under:
On Application ₹ 30,
On Allotment ₹ 60, and
On Call Balance Amount.
The issue was fully subscribed and allotment was made to all the applicants. The
company did not make the call during the year.
Show Share Capital in the Balance Sheet of the company.
140. Star Ltd. is registered with capital of ₹ 50,00,000 divided into 50,000 equity
shares of ₹ 100 each. The Company issued 25,000 equity shares for subscription.
Subscription was received for 23,750 shares and all the due amount was duly
received, except the first and final call of ₹ 20 per share on 600 shares. Show the
'Share Capital' in the Balance Sheet of the company.
Note: Problems related to Disclosure of Share Capital in company's Balance Sheet
are also given under the head issue of shares at par and at premium.
[Ans.: Subscribed Capital—₹ 23,63,000.]
141. Altaur Ltd. was registered with an authorised Capital of ₹ 4,00,00,000 divided in
25,00,000 Equity Shares of ₹ 10 each and 1,50,000, 9% Preference Shares of ₹ 100
each. The company issued 8,00,000 Equity Shares for public subscription at 20%
premium, payable ₹ 3 on application; ₹ 7 on allotment (including premium) and
balance on call. Public had applied for 10,00,000 shares. Excess Applications were
sent letters of regret.
All the dues on allotment were received except on 15,000 shares held by Sanju.
Another shareholder Rocky paid his call dues along with allotment on his holding of
25,000 shares. You are required to prepare the Balance Sheet of the company as per
Schedule III of Companies Act, 2013, showing Share Capital balance and also prepare
Notes to Accounts. (CBSE Sample Paper 2023)
[Ans.: Subscribed Capital—₹ 63,25,000.]

Q. 142. Vikas Ltd. has an authorised capital of ₹40,00,000 divided into 4,00,000 Equity
Shares of ₹10 each. Out of these, the company invited applications for 3,00,000 equity
shares.
The public applied for 2,80,000 shares and all the money was duly received.
Show how Share Capital will appear in the Balance Sheet of the Company. Also
prepare notes to accounts.
[Ans. Subscribed and Fully Paid Capital ₹28,00,000]
Q. 143 ‘Tractors India Ltd.’ is registered with an authorized capital of ₹ 10,00,000
divided into 1,00,000 equity shares of ₹10 each. The company issued 50,000 equity
shares at a premium of ₹5 per share. ₹2 per share were payable with application, ₹8
per share including premium on allotment and the balance amount on first and final
call. The issue was fully subscribed and all the amount due was received except the
first and final call money on 500 shares allotted to Balram.
Present the ‘Share Capital’ in the Balance Sheet of ‘Tractors India Ltd.’ as per
Schedule III Part I of the Companies Act, 2013. Also prepare Notes to Accounts for
the same. (C.B.S.E. 2015)
[Ans. Subscribed and Fully Paid Capital ₹4,95,000;
Subscribed but not Fully Paid Capital ₹2,500.]
Q. 144. Nupur Ltd. was registered with an Authorised Capital of ₹20,00,000 divided
into 2,00,000 equity shares of ₹10 each. The Company offered 1,50,000 equity shares
for subscription to public and applications were received for 1,40,000 equity shares.
The directors called ₹7 per share upto 31st March and the money called was duly
received.
Show the Share Capital in the Balance Sheet of the Company together with notes to
accounts.
[Ans. Subscribed but not fully paid capital ₹9,80,000.]
Q. 145. On 1st April, 2021, Shakti Ltd. was formed with an authorized capital of
^60,00,000 divided into 3,00,000 equity shares of ₹20 each. Out of these, 50,000
shares were issued to the vendors as fully paid up for purchase of office premises.
The directors offered 1,20,000 shares to the public and called up ₹10 per share and
received the entire called up amount on these shares.
Show the share capital in the Balance Sheet of the company as per Schedule-Ill and
also prepare ‘notes to accounts’.
[Ans. Subscribed and Fully Paid Capital ₹ 10,00,000; Subscribed but not fully paid
capital ₹ 12,00,000.]
Q. 146. ‘Suvidha Ltd.’ is registered with an authorized capital of ₹ 10,00,00,000 divided into
10,00,000 equity shares of ₹100 each. The company issued 1,00,000 shares for public
subscription. A shareholder holding 100 shares, failed to pay the final call of ₹20 per share.
His shares were forfeited. The forfeited shares were re-issued at ₹90 per share as fully paid
up.
Present the ‘Share Capital’ in the Balance Sheet of the company as per Schedule III Part I of
the Companies Act, 2013. Also prepare ‘Notes to Accounts’.
[Ans. Subscribed and Fully Paid Capital ₹ 1,00,00,000]
Q. 147. Xansa Ltd. offered 22,000 equity shares of ₹ 100 each to the public at a premium of
₹20 per share. The amount per share was payable as ₹30 on application; ₹50 (including
premium) on allotment; and the balance on first and final call. 20,000 shares were subscribed
by the public. All calls were made. A shareholder holding
1,000 shares failed to pay the first and final call money. His share were forfeited. Show ‘Share
Capital’ in the Balance Sheet of Xansa Ltd. Also, prepare ‘Notes to Accounts’.
(C.B.S.E. 2017, Delhi)
[Ans. Subscribed and Fully Paid Share Capital ₹ 19,00,000.]
Hint: Forfeited Shares A/c is not added to Subscribed and Fully Paid Share Capital.
Q. 148 David Ltd. issued ₹40,00,000 equity shares of ₹ 10 each out of its registered capital of
₹ 10,00,00,000. The amount payable on these shares was as follows :
On application ₹ 1 per share
On allotment ₹ 2 per share
On first call ₹ 3 per share
On second and final call ₹ 4 per share
All calls were made and were duly received, except the second and final call on 1,000 shares
held by Vipul. These shares were forfeited.
Present the ‘Share Capital’ in the Balance sheet of the company as per Schedule III Part I of
the Companies Act, 2013. Also prepare ‘Notes to Accounts’. (CBSE 2015)
[Ans. Subscribed and Fully Paid Capital ₹39,90,000]
Q. 149. On 1st April, 2021, Blue Heaven Ltd. was formed with an authorised capital of
₹20,00,000 divided into 2,00,000 equity shares of ₹10 each. The company issued prospectus
inviting applications for 1,50,000 equity shares. The company received applications for
1,40,000 equity shares. During the first year, ₹7 per share were called. Arun holding 4,000
shares and Varan holding 3,000 shares did not pay the first call of ₹2 per share. Varan’s
shares were forfeited after the first call and later on 1,800 of the forfeited shares were re-
issued at ₹5 per share, ₹7 called up.
Show the following :
(a) Share Capital in the Balance Sheet of the company as per Schedule III Part I of the
Companies Act, 2013.
(b) Also prepare ‘Notes to Accounts’ for the same.
[Ans. Subscribed but not fully paid capital ₹9,63,600.]
Hint: Forfeited Shares A/c is not added to Subscribed but not Fully Paid Share Capital.
Q. 150. Star Ltd. was registered with an authorised Capital of ₹ 1,00,00,000 divided into
40,000 8% Preference Shares of ₹ 100 each and 3,00,000 Equity Shares of ₹20 each.
It issued a prospectus inviting application for 2,00,000 equity shares at a premium of ₹30 each,
payable ₹7 on application; ₹35 on allotment (including premium) and balance on Call. Public
applied for 2,50,000 shares. Full allotment was made to applicants for 2,00,000 shares and
excess application money was refunded.
Allotment was made and allotment money was duly received except on 2,000 shares held by
Varsha, while another shareholder Kirpa holding 500 shares paid the Call money also on
allotment.
Present the ‘Share Capital’ in the Balance Sheet of the company as per Schedule III of the
Companies Act, 2013. Also prepare ‘Notes to Accounts’.
[Ans. Subscribed but not fully paid Capital ₹23,90,000.]
Q.151. . Surya Tubes Limited issued 20,000 shares of ₹ 100 each. The due amount was
received except for 500 shares on which ₹75 per share was received. These 500 shares were
forfeited and 300 shares were reissued for ₹60 each fully paid-up.
Prepare Forfeited Shares Account and show the Share Capital in the Balance Sheet as at
closing date.
[Ans. Capital Reserve ₹ 10,500; Balance of Forfeited Shares Account ₹ 15,000; Subscribed
and Fully Paid Capital ₹ 19,80,000.]
 ISSUE OF DEBENTURES
Issue of Debentures at Par
1. Venus Ltd. issued 40,000; 10% Debentures of ₹ 100 each at par for cash payable as ₹ 30
on application , ₹30 on allotment & ₹ 40 on first call. Pass journal entries.
2. JS Ltd. issued 2,000; 9% Debentures of ₹ 100 each payable as follows:
₹ 25 on application; ₹ 25 on allotment and ₹ 50 on first and final call.
Applications were received for all the debentures along with the application money and
allotment was made. Call money was also received on the due date. Pass necessary Journal
entries in the books of the company.
3. Super Seals Ltd. issued 10,000, 8% Debentures of ₹ 100 each at par for subscription
payable ₹ 40 on application, ₹ 30 on allotment and balance as first and final call. Debentures
issued were applied and allotment was made. First and Final Call is yet to be made.
You are required to pass the necessary Journal entries.
4. Dogra Ltd. issued 2,000; 9% Debentures of ₹ 100 each on the following terms:
₹ 20 on application; ₹ 20 on allotment; ₹ 30 on first call; ₹ 30 on second and final call.
Applications were received for 2,400 debentures. Applications for 1,800 debentures were
accepted in full. Applications for 400 debentures were allotted 200 debentures and
applications for 200 debentures were rejected.
Pass necessary Journal entries.
Q. 5. X Ltd. issued 2,000, 15% debentures of ₹ 100 each at Par, payable as follows : ₹25 on
Application; ₹25 on Allotment and ₹50 on First and Final Call.
Applications were received for 3,000 debentures. Applications for 1,600 debentures were
accepted in full. Applications for 600 debentures were allotted 400 debentures and the rest
were rejected. All moneys due were received except final call on 100 debentures.
Pass necessary journal entries.
[Ans Cash at Bank ₹ 1,95,000.]
Q. 6. Balaji Ltd. issued 10,000, 13% Debentures of ₹ 100 each, payable as follows:
₹20 on application, ₹30 on allotment and ₹50 on first and final call.
All the debentures were applied. Ajay, the holder of 300 debentures paid the entire amount on
his holding on allotment whereas Vijay, the holder of200 debentures failed to pay the allotment
and final call. Pass entries.
[Ans. Cash at Bank ₹9,84,000]
Hint (i) Cash received on Allotment ₹3,09,000 (i.e., ₹3,00,000 + ₹ 15,000 - ₹6,000)
(ii) Cash received on 1st Call ₹4,75,000 (i.e., ₹5,00,000 - ₹ 15,000 - ₹ 10,000)
Q. 7 Kamal Ltd. issued 5,000, 12% Debentures of ₹ 100 each, payable as follows :
₹10 on application, ₹15 on allotment, ₹30 on first call and ₹45 on second and final call. A
person who holds 400 debentures paid the amount of first and second calls with allotment.
Another person who is holding 100 debentures failed to pay the amount due on allotment. He,
however, pays this amount alongwith the first call money. Pass entries.
[Ans. Cash at Bank ₹5,00,000.]
Hint: (i) Cash received on Allotment ₹ 1,03,500 (i.e., ₹75,000 + ₹30,000 - ₹ 1,500).
(ii) Cash received on 1st Call ₹ 1,38,000 (i.e., ₹ 1,50,000 - ₹ 12,000) and ₹ 1,500 in respect
of arrears of allotment.
(iii) Cash received on find Call ₹2,07,000 (i.e., ₹2,25,000 - ₹ 18,000).

At Premium
Q. 8. Sunflower Ltd. issued 4,000, 8% Debentures of ₹200 each at a premium of 6% payable
as ₹80 on application and ₹ 132 on allotment. Debentures are redeemable after 7 years.
Record entries assuming all the money is duly received.
9 Nipa Limited issued 10,000 Debentures of ₹ 100 each at a premium of 10%, payable 30%
of nominal (face) value on application (including premium) and the balance on allotment. The
debentures were applied for and the amount was duly received.
You are required to give Journal entries and prepare Cash Book.
10 Raj Ltd. issued 5,000; 8% Debentures of ₹ 100 each at a premium of 5% payable as follows:
₹ 10 on application; ₹ 20 plus premium on allotment and balance on first and final call.
Pass necessary Journal entries.
11. Grand Hospitality Ltd. issued 10,000, 7% Debentures of ₹ 100 each at premium of ₹ 20
per debenture. Issue price was payable as follows: ₹ 40 on application, ₹ 50 (including
premium) on allotment and balance on first and final call. It received ₹ 4,00,000 as application
money. On allotment due amount was received. First and final call is yet to be made.
You are required to pass the necessary Journal entries.
12.Iron Products Ltd. issued 5,000; 9% Debentures of ₹ 100 each at a premium of₹ 40 payable
as follows:
(i) ₹ 40, including premium of ₹ 10 on application;
(ii) ₹ 45, including premium of ₹ 15 on allotment; and
(iii) Balance as first and final call.
The issue was subscribed and allotment made. Calls were made and due amount was
received.
Pass Journal entries.

Q. 13 X Ltd. issued 5,000, 12% Debentures of ₹100 each at a premium of ₹5 payable as

follows :
On Application ₹30 (including premium)
On Allotment ₹40
On 1st and Final Call The balance amount
Applications were received for 6,000 debentures and allotment was made pro-rata to all
applicants. All the moneys were duly received. Pass necessary journal entries.
[Ans. Cash at Bank ₹5,25,000. Cash received on allotment ₹ 1,70,000 and on first call ₹
1,75,000.]
Q. 14. Nav Lakshmi Ltd. invited applications for issuing 3,000, 12% Debentures of ₹100 each
at a premium of ₹50 per debenture. The full amount was payable on application.
Applications were received for 4,000 debentures. Applications for 1,000 debentures were
rejected and application money was refunded. Debentures were allotted to the remaining
applicants.
Pass necessary journal entries for the above transactions in the books of Nav Lakshmi Ltd.

At Discount
Q. 15. R Ltd. issued 8,000, 13% Debentures of ₹ 100 each at a discount of 5% payable as
follows :
On Application ₹25
On Allotment ₹25
On First and Final Call The balance amount
Public applied for 6,000 debentures. All the moneys were duly received. Expenses on issue
of debentures amounted to ₹20,000.
Pass journal entries (for first year only).
Q. 16. Kaveri Ltd. issued 10,000, 8% debentures of ₹50 each at a discount of 6%. The full
amount was payable on application. Applications were received for 12,000 debentures and
allotment was made on pro-rata basis.
Pass the necessary journal entries for the above transactions in the books of Kaveri Ltd.
[Ans. Amount refunded ₹94,000]
17 Kati Ltd. issued 8,000, 9% Debentures of ₹ 100 each at a discount of 10%. The full amount
was payable on application. Applications were received for 9,000 debentures and allotment
was made on pro rata basis.
Pass the necessary Journal entries for the above transactions in the books of Kati Ltd.
(CBSE2020)
[Ans.: Discount on Issue of Debentures—₹ 80,000; Excess amount refunded—₹ 90,000.]
18. Linux Ltd. issued 12,000; 8% Debentures of ₹ 100 each at a discount of 5% payable as
25% on application; 20% on allotment and balance after three months.
Pass Journal entries.
19. Alka Ltd. issued 5,000, 10% Debentures of ₹ 1,000 each at a discount of 10% redeemable
after 5 years.
According to the terms of issue, ₹ 500 (after discount of ₹ 50) was payable on application and
the balance amount on allotment of debentures. Record necessary entries regarding issue of
10% Debentures.
20. The Decor Ltd. Issued 20,000, 6% Debentures of ₹ 100 each at 10% discount payable ₹
30 on application, ₹ 40 (after discount) and balance as first and final call. Debentures were
subscribed and allotment was made. Amount due on allotment was made and received. First
and final call is yet to be made.
You are required to pass the necessary Journal entries.

Consideration other than Cash

21. Joy Ltd. company bought a Building for ₹ 9,00,000 and the consideration was paid by
issuing 10% Debentures of the nominal (face) value of ₹ 100 each at a discount of 10%.
Give Journal entries. [Ans.: 10,000; 10% Debentures of ₹ 100 each.]
22. Amrit Ltd. issued 1,000, 6% Debentures of ₹ 100 each to Amit and Bhaskar (Promoters)
each for their services in incorporating the company.
Pass Journal entry.
[Ans.: Dr. Incorporation Expenses or Preliminary Expenses A/c and Cr. 6% Debentures A/c
by ₹ 2,00,000.]
23. B Ltd. issued 9% Debentures of ₹ 100 each at a premium of 20% to Vendors for purchase
of plant costing ₹ 6,00,000. Pass the necessary Journal entry for the payment made to
vendors. (CBSE 2020 C)
[Ans.: No. of Debentures issued = ₹ 6,00,000/ ₹ 120 = 5,000.]
24. Ananya Ltd. purchased an established business for ₹ 2,00,000 payable as ₹ 65,000 by
cheque and the balance by issuing 9% Debentures of ₹ 100 each at a discount of 10%.
Give Journal entries in the books of Ananya Ltd. [Ans.: 1,500; 9% Debentures of ₹ 100 each.]
25. Reliance Ltd. purchased machinery costing ₹ 1,35,000. It was agreed that the purchase
consideration be paid by issuing 9% Debentures of ₹100 each. If debentures have been issued
(i) at par and (ii) at a discount of 10%. Give necessary Journal entries.
[Ans.: Number of Debentures Issued—(i) 1,350; (ii) 1,500]
26. Romi Ltd. acquired assets of ₹ 20 lakh and took over creditors of ₹ 2 lakh from Kapil
Enterprises. Romi Ltd. issued 8% Debentures of ₹100 each at a discount of 10% as purchase
consideration.
Record necessary Journal entries in the books of Romi Ltd.
[Ans.: No. of Debentures Issued—20,000.]
Q. 27 Raj Ltd. purchases furniture costing ₹2,20,000. It was agreed that the purchase
consideration be paid by issue of 15% debentures of ₹100 each. Assume debentures have
been issued : (i) at par, and (ii) at a premium of 10%.
Give necessary journal entries.
[Ans. Number of Debentures issued in Case (i) 2,200, and Case (ii) 2,000.]
Q. 28. Ashoka Ltd. purchased machinery costing ₹ 1,35,000. It was agreed that the purchase
consideration be paid by issuing 12% debentures of ₹100 each. Assume debentures have
been issued, (i) at par, and (ii) at a discount of 10%.
Give necessary journal entries.
[Ans. Number of Debentures issued in Case I 1,350, and Case II 1,500.]
Q. 29. Suvidha Ltd. purchased machinery for ₹ 1,98,000 from Suppliers Ltd. The payment was
made by issue of 12% debentures of ₹ 100 each. Pass necessary journal entries for the
purchase of machinery and issue of debentures when
(i) Debentures are issued at par.
(ii) Debentures are issued at 10% discount.
(iii) Debentures are issued at 10% premium.
[Ans. Number of Debentures issued in Case (i) 1,980; Case (ii) 2,200 and Case (iii) 1,800.]
Q. 30 Romi Ltd. acquired assets of ₹20 lakhs and took over creditors of ₹2 lakhs from Kapil
Enterprises. Romi Ltd. issued 8% debentures of ₹ 100 each at a discount of 10% as purchase
consideration. Record necessary journal entries in the books of Romi Ltd.
[Ans. No. of Debentures issued 20,000.]
Q. 31. X Company purchased assets of the book value of ₹ 10,45,000 from Y Co. It was
agreed that the purchase consideration be paid by issuing 14% Debentures of ₹ 100 each.
Assume debentures have been issued (i) at par; (ii) at a premium of 10%, and at a discount
of 5%.
Give necessary journal entries in the books of X Company.
[Ans. Number of Debentures issued in Case (I) 10,450; Case (II) 9,500, and Case (III) 11,000.]
Q. 32 Golden Ltd. bought assets for ₹5,50,00,000 and assumed liabilities worth ₹ 1,26,00,000
from Silver Ltd. and issued 8% Debentures of ₹500 each at a premium of 6%. Record
necessary entries in the books of Golden Ltd.
[Ans. Number of Debentures Issued 80,000.]
Q. 33. Nupur Ltd. took over Plant and Machinery worth ₹ 8,00,000, Stock worth ₹ 7,00,000
and Sundry Debtors for ₹6,00,000 from Vandna Ltd. for a purchase consideration of
₹22,80,000. Nupur Ltd. paid the purchase consideration by issuing 8% Debentures of ₹200
each. Pass entries in the books of Nupur Ltd. when :
(а) Debentures were issued at 5% discount.
(b) Debentures were issued at 20% premium.
[Ans. Goodwill ₹ 1,80,000; Number of Debentures issued in Case (a) 12,000 and in Case (b)
9,500.]
Q. 34 Disha Ltd. took over assets of ₹8,00,000 and liabilities of ₹3,00,000 from Kirti Ltd. for a
purchase consideration of ₹6,00,000. The payment was made by issue of 9% Debentures of
₹ 100 each at 20% premium.
Pass the necessary journal entries for the above transactions in the books of Disha Ltd.
(C.B.S.E. 2020, Punjab)
[Ans. Goodwill ₹ 1,00,000; Debentures issued : 5,000 Debentures of ₹ 100 each.]
Q. 35. A Company purchased Assets of the book value of ₹ 12,00,000 and Liabilities of
₹2,20,000 of another Company for a purchase consideration of ₹ 9,40,000. The purchase
consideration was discharged by the issue of debentures of ₹500 each at a discount of 6%.
Pass journal entries in the books of purchasing company. Company writes off all capital losses
in the first year itself.
[Ans. Capital Reserve ₹40,000; Debentures issued : 2,000 Debentures of ₹500 each. Discount
on issue ₹ 60,000; It will be written off from Statement of Profit & Loss.]
Q. 36. J Ltd. purchased machinery for ₹3,50,000 from K Ltd. on 28.2.2023. ₹50,000 were paid
to K Ltd. immediately and the balance was paid by issue of 10% debentures of ₹3,10,000 in J
Ltd. Pass the necessary journal entries including writing off discount on issue of debentures.
[Ans. Discount on issue of debentures will be debited by ₹ 10,000.]
Q. 37 Star Textiles Ltd. purchased assets of Modem Textiles Ltd. as under :
Land and Buildings of ₹25,00,000 at ₹40,00,000; Plant and Machinery of ₹ 10,00,000 for
₹7,50,000 and Furniture of ₹3,00,000 for ₹ 1,00,000 for purchase consideration of ₹45,00,000.
Star Textiles Ltd. paid ₹3,00,000 in cash and remaining by issue of 9% Debentures of ₹ 500
each at a premium of 5%. Record necessary entries in the books of Star Textiles Ltd.
[Ans. Capital Reserve ₹3,50,000; Debentures issued : 8,000 Debentures of ₹ 500 each.]
38. Green Ltd. purchased the assets of Strong Ltd. for ₹ 40,00,000 and took over liabilities of
₹ 7,00,000 for ₹ 32,40,000. Payment was made by issuing 10% Debentures of ₹ 100 each at
a discount of 10%. Pass the necessary Journal entries in the books of Green Ltd.
[Ans.: (i) Dr. Sundry Assets A/c by ₹ 40,00,000; Cr. Sundry Liabilities A/c by ₹ 7,00,000,
Strong Ltd. by ₹ 32,40,000 and Capital Reserve A/c by ₹ 60,000.
(ii) Dr. Strong Ltd. by ₹ 32,40,000 and Discount on Issue of Debentures A/c by ₹ 3,60,000;
Cr. 10% Debentures A/c by ₹ 36,00,000.
Number of Debentures to be issued = ₹ 32,40,000/₹ 90 = 36,000 Debentures.]
39. Anthony Ltd. issued 20,000,9% Debentures of ₹ 100 each at 10% discount to Mithoo Ltd.
from whom Assets of ₹ 23,50,000 and Liabilities of ₹ 6,00,000 were taken over. Pass entries
in the books of Anthony Ltd., if these debentures were to be redeemed at 5% premium.
(CBSE Sample Paper 2023)
[Ans.: Goodwill—₹ 50,000; No. of Debentures issued—20,000.]
Q. 40. Deepak Ltd. purchased furniture for ₹ 2,20,000 from M/s Furniture Mart. 50% of the
amount was paid to Furniture Mart by accepting a bill of exchange and for the balance the
company issued 9% debentures of ₹ 100 each at a premium of 10% in favour of Furniture
Mart.
Pass necessary journal entries in the books of Deepak Ltd. for the above transactions.
[Ans. Debentures issued of the face value of ₹ 1,00,000; Securities Premium ₹ 10,000.]
Q. 41. Vayee Ltd. purchased the following assets of E.X. Ltd. :
Land and Building of ₹60,00,000 at ₹ 84,00,000; Plant and Machinery of ₹ 40,00,000 at
₹36,00,000.
The purchase consideration was ₹ 1,10,00,000. Payment was made by accepting a Bill of
Exchange in favour of E.X. Ltd. of ₹20,00,000 and remaining by issue of 8% debentures of ₹
100 each at a premium of 20%.
Record the necessary journal entries for the above transactions in the books of Vayee Ltd.
(C.B.S.E. 2020, Mumbai, Chennai)
[Ans. Capital Reserve ₹10,00,000; Number of Debentures issued 75,000]
Q. 42. Tushar Ltd. purchased assets of ₹ 14,40,000 and liabilities of ₹2,55,000 from Chander
Ltd. on 1.4.2021. ₹2,40,000 were paid immediately. Pass journal entries in the books of Tushar
Ltd. if the balance was paid as follows :
Case (i) by issue of ₹ 9,00,000, 11% debentures in Tushar Ltd.
Case (ii) by issue of ₹ 10,50,000, 12% debentures in Tushar Ltd.
[Ans. Case (i) Securities Premium will be credited by ₹45,000; Case (ii) Discount on issue of
debentures will be debited by ₹ 1,05,000.]
Q. 43 (HOTS) A Company purchased assets of the book value of ₹6,00,000 and took over
liabilities of ₹ 1,50,000 from Golden Ltd. It was agreed that the purchase consideration settled
at ₹4,80,000 be paid by issuing debentures of ₹ 100 each at a premium of 10%. It was further
agreed that any fraction of the debenture be paid in cash. Give journal entries in the books of
purchasing company.
Q. 44 (HOTS) X Ltd. took over assets of ₹ 5,00,000 and liabilities of ₹ 1,00,000 of another
company at an agreed price of ₹3,80,000. The purchase consideration was discharged by
issuing debentures of ₹ 100 each at a discount of 10%. It was agreed that any fraction of the
debenture be paid in cash. Give journal entries in the books of X Ltd. Ignore writing off discount
on issue of debentures.

45.. Neeraj Ltd. took over business of Ajay Enterprises on 1-04-2020. The details of the
agreement regarding the assets and liabilities to be taken over are:

Particulars Book Value (₹) Agreed Value (₹)

Building 20,00,000 35,00,000

Plant and Machinery 12,00,000 8,00,000

Stock 4,00,000 4,00,000

Trade receivables 5,00,000 4,00,000

Creditors 2,00,000 3,00,000

Outstanding Expenses 50,000 1,00,000

It was decided to pay for purchase consideration as ₹ 7, 00,000 through Cheque and balance
by issue of 2,00,000, 9% Debentures of ₹ 20 each at a premium of 25%. Journalise.
(CBSE Sample Paper 2020)
[Ans.: Goodwill—₹ 10,00,000.]
46. Grown Ltd. issued 500,10% Debentures of ₹ 1,000 each credited as fully paid-up to the
promoters for their services to incorporate the company. It also issued 100,10% Debentures
of ₹ 1,000 each credited as fully paid-up to the underwriters towards their commission. Pass
the Journal entries.
[Ans.: (i) Dr. Incorporation Expenses or Preliminary Expenses A/c and Cr. Promoters' A/c by
₹ 5,00,000.
(ii) Dr. Promoters’ A/c and Cr. 10% Debentures A/c by ₹ 5,00,000.
(iii) Dr. Underwriting Commission A/c and Cr. Underwriters' A/c by ₹ 1,00,000.
(iv)Dr. Underwriters' A/c and Cr. 10% Debentures A/c ₹ 1,00,000.]
47. Bright Ltd. took over the assets of ₹ 6,60,000 and liabilities of ₹ 80,000 of Star Ltd. for an
agreed purchase consideration of ₹ 6,00,000 payable 10% in cash and the balance by the
issue of 12% Debentures of ₹ 100 each. Give necessary Journal entries in the books of Bright
Ltd., if:
Case 1. The debentures are issued at par.
Case 2. The debentures are issued at 20% premium.
Case 3. The debentures are issued at 10% discount.
[Ans.: Entry in all Cases: Dr. Sundry Assets A/c—₹ 6,60,000 and Goodwill A/c—₹ 20,000;
Cr. Sundry Liabilities A/c—₹ 80,000 and Star Ltd.—₹ 6,00,000.
Entry for Cash Payment in all Cases: Dr. Star Ltd. and Cr. Cash/Bank A/c by ₹ 60,000.
Case 1. Dr. Star Ltd. and Cr. 12% Debentures A/c by ₹ 5,40,000.
Case 2. Dr. Star Ltd.—₹ 5,40,000; Cr. 12% Debentures A/c—₹ 4,50,000 and
 Securities Premium A/c—₹ 90,000.
Case 3. Dr. Star Ltd.—₹ 5,40,000 and Discount on Issue of Debentures A/c—₹ 60,000;
Cr. 12% Debentures A/c—₹ 6,00,000.]
Q. 48 Gunjan Limited purchased a running business from Vrindavan Limited for a sum of
₹25,00,000, payable ₹4,00,000 by cheque and for the balance issued 8% Debentures of ₹
100 each at 5% premium.
The assets and liabilities consisted of the following :
Book Value (₹) Agreed Value (₹)
Land and Buildings 5,00,000 9,00,000
Plant and Machinery 10,00,000 8,00,000
Patents 1,00,000 40,000
Sundry Debtors 8,00,000 Subject to 5%
Provision
Stock 6,00,000 4,40,000
Sundry Creditors 1,20,000 1,20,000
Record necessary journal entries in the books of Gunjan Limited.
[Ans. Capital Reserve ₹3,20,000; Number of Debentures issued 20,000]
Q. 49. Disha Ltd. purchased machinery form Nisha Ltd. and paid to Nisha Ltd. as follows :
(i) By issuing 10,000, equity shares of ₹ 10 each at a premium of 10%.
(ii) By issuing 200, 9% debentures of ₹ 100 each at a discount of 10%.
(iii) Balance by accepting a bill of exchange of ₹ 50,000 payable after one month.
Pass necessary journal entries in the books of Disha Ltd.
(C.B.S.E. 2017 Comptt.)
[Ans. Machinery purchased for ₹ 1,78,000. Discount on Issue of Debentures will be written off
from Securities Premium A/c.]

Issue of Debentures as Collateral Security

50. A company took loan of ₹ 4,00,000 from Bandhan Bank Ltd. and issued 8% Debentures
of ₹ 4,00,000 as a collateral security.
Explain how will the issue of debentures be dealt with in the books of the company.
51. Best Barcode Ltd. took loan of ₹ 5,00,000 from a bank giving ₹ 6,00,000; 9% Debentures
as collateral security.
Pass Journal entries regarding issue of debentures, if any, and show this loan in the Balance
Sheet of the company.
52. X Ltd. took loan of ₹ 3,00,000 from IDBI Bank. The company issued 4,000; 9% Debentures
of ₹ 100 each as a collateral security for the same. Show how these items will be shown in the
Balance Sheet of the company.
53. S. Singh Limited obtained loan of ₹ 5,00,000 from State Bank of India @ 10% p.a. interest.
The company issued ₹ 7,50,000, 10% Debentures of ₹ 100 each in favour of State Bank of
India as Collateral Security. Pass necessary Journal entries for the above transactions:
(i) When company decided not to record the issue of 10% Debentures as Collateral Security.
(ii) When company decided to record the issue of 10% Debentures as Collateral Security.
(CBSE Sample Paper 2019)

Q. 54. S. Singh Limited obtained a loan of ₹5,00,000 from State Bank of India @10% interest.
The company issued ₹7,50,000, 10% debentures of ₹100 each, in favour of State Bank of
India as collateral security. Pass necessary journal entries for the above transactions :
(i) When company decided not to record the issue of 10% Debentures as collateral security.
(ii) When company decided to record the issue of 10% Debentures as collateral security.
(C.B. S. E. Sample Paper, 2019)
Q. 55 Hassan Limited took a loan of ₹30,00,000 from a bank against primary security worth
₹40,00,000 and issued 35,000, 6% debentures of ₹100 each as a collateral security. The
company again after one year took a loan of ₹50,00,000 from bank against Plant as primary
security and deposited 60,000, 6% debentures of ₹ 100 each as collateral security. Record
necessary journal entries. How will you show the issue of debentures and bank loan in the
balance sheet of the company.
Q. 56 India Ltd. made the following issue of 6% debentures :
(i) For cash at 90%, 6,000 debentures of ₹ 100 each.
(ii) 1,100 debentures of ₹ 100 each to a creditor regarding machinery costing ₹1,00,000.
(iii) To bank for a loan of ₹7,00,000 as collateral security 10,000 debentures of ₹100 each.
Pass Journal entries for first year only. All capital losses are to be written off in the first year
itself.
[Ans. (i) Discount on Issue of Debentures ₹60,000;
(ii) Discount on Issue of Debentures ₹10,000;
(iii) Dr. Bank A/c; Cr. Bank Loan A/c by ₹7,00,000, and
Dr. Debenture Suspense A/c; Cr. Debentures A/c by ₹10,00,000.]
Q. 57 X Ltd. issued 25,000, 9% Debentures of ₹100 each at a premium of ₹4 per debenture
on 1st April, 2022. On the same date it purchased Property, Plant and Equipment of
₹10,00,000 and took over current liabilities of ₹70,000 of Y Ltd. and paid ₹4,00,000 in Cash
and remaining by issue of ₹5,00,000, 9% debentures at a premium 6%. On the same date it
took a loan from the Bank for ₹6,00,000 and issued 9% debentures as collateral security. Give
entries and the extract of Balance Sheet on 31st March, 2023. Ignore interest.
[Ans. Securities Premium ₹1,30,000.]
Q. 58. Usha Ltd. issued 30,000, 10% Debentures of ₹100 each as collateral security for a loan
of ₹24,00,000 from Axis Bank. The company was unable to repay the loan on which interest
payable was ₹6,00,000 as on 31st March, 2022.
Axis Bank, on 31st March, 2022, exercised the right vested in it by way of debentures being
issued as collateral Security.
Pass Journal entries in the books of Usha Ltd. on 31st March, 2022.
Accounting for Issue of Debentures Considering the Terms
and Conditions of Redemption
59. Journalise the following:
(a) A debenture issued at ₹ 95, repayable at ₹ 100.
(b) A debenture issued at ₹ 95, repayable at ₹ 105.
(c) A debenture issued at ₹ 100, repayable at ₹ 105.
The face value of debenture is ₹ 100 in each of the above cases.
Q. 60. Pass the necessary Journal entries for the issue of 7% debentures in the following
cases :
(i) 100 debentures of ₹ 100 each issued at ₹ 105 each repayable at ₹ 100 each.
(ii) 100 debentures of ₹ 100 each issued at ₹ 100 each repayable at ₹ 105 each.
(iii) 100 debentures of ₹ 100 each issued at ₹ 105 each repayable at ₹ 108 each.
Ignore writing off loss on issue of debentures.

Q. 61 What journal entries will be made in the following cases :

(i) A company issued ₹40,000, 12% Debentures at par, redeemable also at par.
(ii) A company issued ₹40,000, 12% Debentures at a discount of 10% redeemable at par;
(III) A company issued ₹40,000, 12% Debentures at a premium of 5% redeemable at par;
(iv) A company issued ₹40,000, 12% Debentures at par, redeemable at 10% premium; and
(v) A company issued ₹40,000, 12% Debentures at a discount of 5% and redeemable at 5%
premium.
Note. The face value of a 12% Debenture is ₹100.
Q. 62 KTR Ltd., issued 365, 9% Debentures of ₹1,000 each on 4-3-2016.
Pass necessary Journal entries for the issue of debentures in the following situations :
(a) When debentures were issued at par redeemable at a premium of 10%.
(b) When debentures were issued at 6% discount redeemable at 5% premium.

63. Pass necessary Journal entries for the issue of debentures in the following cases:
(a) ₹ 40,000; 12% Debentures of ₹ 100 each issued at a premium of 5% redeemable at par.
(b) ₹ 70,000; 12% Debentures of ₹ 100 each issued at a premium of 5% redeemable at ₹ 110.
(Delhi 2013)
64 Care Cosmetics Ltd. issued 50,000; 9% Debentures of ₹ 10 each on 1st April, 2021
redeemable at a premium of 10% after 10 years. According to the terms of issue, ₹ 4 is payable
on application and balance on allotment of debentures. Record necessary Journal entries
regarding issue of debentures.
Q. 65. Pass necessary Journal Entries relating to the issue of debentures for the following :
(i) Issued ₹4,00,000, 9% debentures of ₹100 each at a premium of 8% redeemable at 10%
premium.
(ii) Issued ₹6,00,000, 9% debentures of ₹ 100 each at par, repayable at a premium of 10%.
(iii) Issued ₹ 10,00,000, 9% debentures of ₹ 100 each at a premium of 5%, redeemable at par.
Q. 66. Journalise the following transactions :
(i) 400 debentures issued at ₹ 960 each, repayable at ₹ 1,000 each.
(ii) 400 debentures issued at ₹ 1,040 each, repayable at ₹ 1,000 each.
(iii) 400 debentures issued at ₹ 1,000 each, repayable at ₹ 1,060 each.
(iv) 400 debentures issued at ₹ 960 each, repayable at ₹ 1,060 each.
(The face value of each debenture is ₹ 1,000)
Q. 67. Give the journal entries at the time of issue of debentures in the following cases :
(i) Issued ₹5,00,000, 12% debentures at par and redeemable at par after 5 years.
(ii) Issued ₹ 8,00,000, 11% debentures at 6% discount, redeemable at par after 4 years.
(iii) Issued ₹ 10,00,000, 14% debentures at 5% premium, redeemable at par after 4 years.
(iv) Issued ₹20,00,000, 12% debentures at par, redeemable at 5% premium after 3 years.
(v) Issued ₹ 12,00,000, 13% debentures at 4% discount, redeemable at 6% premium after 3
years.
Q. 68. Journalise the following transactions :
(a) X Ltd. issues ₹2,00,000, 12% Debentures at a discount of 5% redeemable at par.
(b) Y Ltd. issues ₹5,00,000, 11% Debentures at a discount of 5% redeemable at a premium
of 7%.
Q. 69. (a) Journalise the following transactions at the time of issue of debentures : Nandan
Ltd. issued ₹90,000, 12% debentures of ₹ 100 each at a discount of 5% redeemable at 110%.
(b) Winona Ltd. issued ₹ 80,000, 11% debentures of ₹100 each at a premium of 5%
redeemable at a premium of 10%. (C.B.S.E. 2017, Comptt.)
Q. 70 A company issues the following debentures :
(a) 10,000, 12% debentures of ₹ 100 each at par but redeemable at a premium of 5% after 5
years;
(b) 10,000, 12% debentures of ₹ 100 each at a discount of 5%, but redeemable at a premium
of 5% after 5 years;
(c) 5,000, 12% debentures of ₹ 100 each at a premium of 10% but redeemable at par after 5
years;
(d) 1,000, 14% debentures of ₹ 100 each issued to a supplier of machinery costing ₹95,000,
the debentures are repayable after 5 years; and
(e) 300, 13% debentures of ₹ 100 each as a collateral security to a bank who has advanced
a loan of ₹25,000 to the company for a period of 5 years.
Pass the Journal entries to record the issue of debentures.
Q. 71. Show by means of journal entries how would you record the following issues.
(i) A Ltd. issues ₹5,00,000, 13% Debentures at a discount of 8% redeemable at par.
(ii) B Ltd. issues ₹ 6,00,000, 12% Debentures at a discount of 6% redeemable at a premium
of 7%.
(iii) C Ltd. purchased plant and machinery for ₹8,00,000 payable as to ₹2,30,000 in cash and
the balance by an issue of 10% Debentures of ₹ 100 each at a discount of 5%.
(iv) D Ltd. issued 500, 11% Debentures of ₹ 100 each as a collateral security to a Bank who
has advanced a loan of ₹45,000 to the Company for a period of 7 years.
(v) E Ltd. issued ₹2,20,000 Debentures to a creditor for ₹2,00,000 Capital Expenditure in
satisfaction of his claim.
[Ans. In Case (iii) Number of Debentures issued 6,000;
In Case (v) Discount on Debentures ₹20,000.]

Q. 72. On 1st April, 2018, X Ltd. issued 7,500, 9% Debentures of ₹50 each at a discount of
6%, redeemable at a premium of 10%. Pass journal entries for the year ending 31st March
2019 and Prepare Debentures Account. (Ignore interest on Debentures). (C.B.S.E. 2019,
Kerala)
[Ans. Loss on Issue of Debentures ₹60,000 will be written off from Statement of Profit and
Loss]

Interest on Debentures
Q. 73. On 1-4-2022, K.K. Ltd. issued 500, 9% Debentures of ₹500 each at a discount of 4%,
redeemable at a premium of 5% after three years.
Pass necessary Journal Entries for the year ended 31-3-2023 assuming that interest is
payable on 30th September and 31st March. The company closes its books on 31st March
every year.
[Ans. Total Interest of ₹22,500 and loss on issue of debentures ₹22,500 will be transferred to
Statement of Profit & Loss on 31st March, 2023.]
74. Agam Ltd. issued 40,000; 9% Debentures of ₹ 100 each on 1st April, 2022 at a discount
of 10% redeemable at a premium of 10%.
Assuming that the interest was paid half yearly on 30th September and 31st March, give
Journal entries relating to debenture interest for the half year ended 31st March, 2023.
[Ans.: Total interest paid—₹ 3,60,000.]
75. Pratham Ltd. issued 50,000,9% Debentures of ₹ 100 each on 1st April, 2022 at10%
discount, redeemable at 10 premium. Interest is payable quarterly on 30th June, 30th
September, 31st December and 31st March.
Pass the Journal entries for interest for the period ended 30th June, 2022.
[Ans.: Interest— ₹ 1,12,500.]
76. Bright Ltd. issued 5,000; 10% Debentures of ₹ 100 each on 1st April, 2022. The issue was
fully subscribed. As per the terms of issue, interest on the debentures is payable half-yearly
on 30th September and 31st March.
Pass necessary Journal entries related to the debenture interest for the year ending 31st
March, 2023 and transfer of interest on debentures of the year to the Statement of Profit &
Loss.

Writing off Discount/Loss on Issue of Debentures

77. Kitply Ltd. issued ₹ 2,00,000,10% Debentures at a discount of 5%. The terms of issue
provide the repayment at the end of 4 years. Kitply Ltd. has a balance of ₹ 5,00,000 in
Securities Premium.
Pass the Journal entries for issue of debentures and writing off the discount.
[Hint: Dr. Securities Premium A/c and Cr. Discount on Issue of Debentures A/c by ₹ 10,000.]
78. Mercury Ltd. issued ₹ 10,00,000; 9% Debentures of ₹ 100 each at a discount of 6% on 1st
April, 2022.These debentures are to be redeemed equally, spread over 5 annual instalments.
It had balance in Capital Reserve of₹ 75,000.
Pass the Journal entries for issue of debentures and writing off the discount.
[Ans.: Dr. Statement of Profit & Loss (Finance Cost) and Cr. Discount on Issue of
Debentures A/c by ₹ 60,000.]
79. Gladiators Ltd. issued 10,000; 8% Debentures of ₹ 100 each at a discount of 5%,
redeemable at a premium of 5% payable along with application. It had balance of ₹ 70,000 in
Securities Premium and ₹ 50,000 in Capital Reserve. The debentures were fully subscribed
and amounts were duly received.
Pass the necessary Journal entries for issue of debentures and writing off Loss on Issue of
Debentures.
[Ans.: Dr. Securities Premium A/c by ₹ 70,000 and Statement of Profit & Loss (Finance Cost)
by ₹ 30,000;
Cr. Loss on Issue of Debentures A/c by ₹ 1,00,000.]
80. Sujata Ltd. invited applications for issuing 50,000, 9% Debentures of ₹ 100 each at a
discount of 10% redeemable at par after 5 years. The debentures were fully subscribed and
all money was duly received. The company had a balance of ₹ 3,00,000 in Securities Premium
which it decided to use for writing off the discount/loss on issue of debentures. It also decided
to write off the remaining discount/loss on issue of debentures in the first year. (CBSE 2020)
Pass the Journal entries for issue of debentures and for writing off discount/loss on issue of
debentures.
Q. 81. On 1-4-2021, X Ltd. issued 40,000, 7% debentures of ₹100 each at a discount of 6%
redeemable at a premium of 2% after four years. The amount was payable as follows :
On application ₹40 per debenture.
Balance on allotment.
Company has a balance of 1,20,000 in Securities Premium and ₹ 1,50,000 in Capital Reserve.
Profit for the year ending 31st March, 2022 was ₹2,00,000.
Pass the journal entries for issue of debentures and writing off the loss on issue of debentures.
[Ans. Loss on issue ₹3,20,000; Loss on issue written off from Securities Premium ₹ 1,20,000
and Statement of Profit & Loss ₹2,00,000]
Note : Capital Reserve cannot be used for writing off Loss on Issue.
Q. 82 Y Ltd. issued on 1st April, 2021, 20,000, 9% Debentures of ₹ 100 each at 4% discount
redeemable after four years at a premium of ₹5. All the debentures were subscribed. During
the year ended 31st March, 2022, the company incurred a loss of ₹70,000. It has balance of
₹ 1,50,000 in Capital Reserve.
Pass the Journal entries for issue of debentures and writing off Loss on Issue of Debentures.
[Ans. Loss on Issue ₹ 1,80,000; Entire amount of Loss on Issue will be written off from
Statement of Profit & Loss.]
Q. 83. On 1st April, 2021, Star Ltd. issued 8,000, 8% Debentures of ₹250 each at a premium
of 5% and redeemable at a premium of 4% after 4 years. According to the terms of issue, ₹
100 was payable on application and balance on allotment. Record necessary entries regarding
issue of debentures and writing off loss on issue of debentures.
[Ans. Entire Loss on Issue ₹80,000 will be written off from Security Premium.]
84. On 1st January, 2018, Raha Ltd. issued 6,000, 8% Debentures of nominal (face) value of
₹ 100 each redeemable at 5% premium in equal proportions at the end of 5, 10 and 15 years.
It has a balance of ₹ 10,000 in Securities Premium.
Pass Journal entries. Also give Journal entries for writing off Loss on Issue of Debentures.
[Hint: Dr. Securities Premium A/c by ₹ 10,000 and Statement of Profit & Loss (Finance Cost)
by ₹ 20,000; Cr. Loss on Issue of Debentures A/c by ₹ 30,000.]
85. Global Ltd. issued 10,000, 8% Debentures of ₹ 100 each redeemable in four equal
instalments by draw of lots from the end of 3 years at a premium of ₹ 9.
Pass the Journal entries for writing off the Loss on Issue of Debentures. Also prepare Loss on
Issue of Debentures Account.
[Ans.: Dr. Statement of Profit & Loss (Finance Cost) and Cr Loss on Issue of Debentures A/c
by ₹ 90,000.]
86. Garvit Ltd. invited applications for issuing 3,000, 11% Debentures of ₹ 100 each at a
discount of 6%. The full amount was payable on application. Applications were received for
3,600 debentures. Applications for 600 debentures were rejected and the application money
was refunded. Debentures were allotted to the remaining applicants.
Pass the necessary Journal entries for the above transactions, including writing off the
Discount on Issue of Debentures, in the books of Garvit Ltd. (CBSE2019, Modified)
[Ans.: (i) Dr Bank A/c and Cr Debentures Application and Allotment A/c by ₹ 3,38,400.
(ii) Dr. Debentures Application and Allotment A/c by ₹ 3,38,400 and Discount on Issue of
Debentures A/c by ₹ 18,000; Cr. 11% Debentures A/c by ₹ 3,00,000 and Bank A/c by ₹
56,400.
(iii) Dr. Statement of Profit & Loss (Finance Cost) and Cr. Discount on Issue of Debentures
A/c by ₹ 18,000.]
87. On 1st June, 2022, R Energy Ltd. issued 10,000,7% Debentures of ₹ 100 each at a
discount of 10% redeemable at a premium of 10% at the end of five years. All the debentures
were subscribed and allotment was made. Prepare the Balance Sheet (extract) as at 31st
March, 2023.
88.. On 1st April, 2022, Solar Power Ltd. issued 10,000, 8% Debentures of ₹ 100 each at a
discount of 5% redeemable at a premium of 15% at the end of five years. All the debentures
were subscribed and allotment was made.
The company had balance in Securities Premium of ₹ 80,000.
Prepare the Balance Sheet (extract) as at 31st March, 2023.
89. On 1st April, 2018, Mathew Ltd. issued 10,000,9% Debentures of ₹ 100 each at a discount
of 5%, redeemable at a premium of 5%. These debentures were redeemable as follows:
On 31st March, 2019 2,000 Debentures;
On 31st March, 2020 5,000 Debentures;
On 31st March, 2021 3,000 Debentures.
Prepare the Loss on Issue of Debentures Account, 9% Debentures Account and Premium on
Redemption of Debentures Account for three years.
[Ans.: (i) Year ended 31st March, 2019: Loss on issue of Debentures—₹ 1,00,000 to be
written off from Statement of Profit & Loss (Finance Cost) in the year of issue itself;
(ii) Year ended 31st March, 2019:9% Debentures A/c will be credited by ₹ 10,00,000.
 Balance in 9% Debentures Account on: 1st April, 2019—₹ 8,00,000; 1st April, 2020—₹
3,00,000, and 1st April, 2021—Nil.
(iii) Year ended 31st March, 2019: Premium on Redemption of Debentures Account will be
credited by ₹ 50,000. Balance in the Premium on Redemption of Debentures Account on 1st
April, 2019—₹ 40,000;
1st April, 2020—₹ 15,000 and 1st April, 2021—Nil.]
Q. 90. Oberoi Ltd. took certain fixed assets for ₹6,30,000 from Vikram Ltd. and allotted 6,000,
12% Debentures at a premium of 5% to satisfy the purchase consideration. The Company
then issued a prospectus inviting the public to subscribe to 20,000, 11% Debentures of ₹100
each at a discount of 2%, payable as ₹35 on application, ₹23 on allotment and the balance on
first and final call.
Applications were received for 16,000 debentures only. All the applications were accepted and
money received except first and final call on 100 debentures. Prepare the Cash Book and the
Journal.
[Ans. Cash at Bank ₹ 15,64,000. Amount received on allotment ₹3,68,000 and on First Call
₹6,36,000; Discount on Issue ₹32,000; Out of this amount ₹30,000 will be written off from
Securities Premium and the remaining ₹2,000 from Statement of Profit and Loss.]
Q. 91. A company took a loan of ₹5,00,000 from State Bank of India and issued 10%
debentures of ₹8,00,000 of ₹ 100 each as a collateral security. Explain how will you deal with
issue of debentures in the books of company.
Q. 92. X Ltd. raised a bank loan of ₹ 10,00,000 and issued by way of collateral security 10,000,
12% Debentures of ₹ 100 each. The Company further issued to public 15,000, 12%
Debentures of ₹ 100 each at 2% discount payable ₹30 on application, ₹18 on allotment, ₹20
on first call and the balance a month later. The public applied for 20,000 debentures.
Applications for 12,000 debentures were accepted in full, applications for 4,000 debentures
were allotted 3,000 debentures and the remaining applications were rejected. All amounts
were duly received. Prepare journal entries.
Hint : Discount on Issue of Debentures ₹30,000 will be written off from Statement of Profit and
Loss.
Q. 93. Z Ltd. issued 20,000, 12% Debentures of ₹ 100 each. Give journal entries if the
Debentures are (1) issued at par, (2) issued at a discount of 10%, and (3) issued at a premium
of 10% (redemption being in all these cases at par).
Also show the entries which will be made if the Debentures are repayable at a premium of 5%
but are issued (a) at par, and (b) at a discount of 10%.
Ans.

Date Particulars L.F. Dr. (₹) Cr. (₹)

2019

March 31 Statement of Profit & Loss Dr. 11,60,000

To Interest on Debentures A/c 3,60,000

To Loss on Issue of Debentures A/c 8,00,000

Q. 94 Zed Ltd. issued 2,00,000, 8% debentures of ₹ 100 each at a discount of 6% redeemable

at a premium of 10% after 5 years. The amount was payable as follows :
On application — ₹50 per debenture and
On allotment — balance
Record the necessary journal entries for the issue of debentures in the books of Zed Ltd.
(C.B.S.E. 2020, Mumbai, Chennai)
[Ans. Loss on Issue ₹32,00,000. It will be written off from Statement of Profit & Loss.]
Q. 95 Random Ltd. took over running business of Mature Ltd. comprising of Assets of
₹45,00,000 and Liabilities of ₹6,40,000 for a purchase consideration of ₹36,00,000. The
amount was settled by bank draft of ₹ 1,50,000 and balance by issuing 12% Debentures of ₹
100 each at 15% premium. Pass entries in the books of Random Ltd.
(C.B.S.E. Sample Paper, 2023)
[Ans. Capital Reserve ₹2,60,000; Number of Debentures issued : 30,000.]