ACCOUNTS GURU®

PEAK PERFORMANCE
BAS MASTERY WORKSHEET
ITNA
KARLO ACCOUNTANCY
CLASS 12
Chapter 5: Retirement of a Partner

1. A, B and C are partners sharing profits in the ratio 4 : 3 : 2. B retires, selling his share of profit to A and C
for ₹7,200 (₹ 4,000 paid by A and ₹3,200 paid by C). The new profit sharing ratio of A and C will be: 1
(a) 17 : 10
(b) 15 : 12
(c) 19 : 8
(d) None of these

2. P, Q and R are partners sharing profits in the ratio 4 : 3 : 2. R retires and he surrenders 2/3 of his share
in favour of P and 1/3 share in favour of Q. The new profit sharing ratio of P and Q would be: 1
(a) 16 : 11
(b) 15 : 12
(c) 17 : 10
(d) None of these

3. On retirement of a partner, the existing goodwill in the Balance Sheet is written off and debited to: 1
(a) All Partners’ Capital A/c in old ratio
(b) Remaining Partners’ Capital A/c in new ratio
(c) Remaining Partners’ capital A/c in gaining ratio
(d) None of these

4. The reserves and accumulated profits at the time of retirement of a partner is transferred to:  1
(a) Retired partner in old ratio
(b) All partners in old ratio
(c) Remaining partners in new ratio
(d) Remaining partners in gaining ratio

5. On retirement/death of a partner, revaluation profit is distributed among: 1

(a) All partners in old ratio
(b) remaining partners in new ratio
(c) remaining partners in new ratio
(d) All partners equally.

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 6. P, Q and R are equal partners. R retires and P and Q agree to share future profits in 3 : 2 ratio.
The goodwill of the firm is valued at ₹ 36,000, which will be adjusted through the entry:

1

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 7. A, B, C and D are partners sharing profits in 2 : 2 : 1 : 1. B retires and remaining partners decided to
share future profits equally. If goodwill of the firm is ₹30,000, the adjustment entry for goodwill will be:

1

8. A, B and C are partners sharing profits and losses in the ratio of 4 : 3 : 2. A retires. B and C decide to
share profits and losses in the ratio 3 : 2. Gaining ratio between B and C will be: 1
(a) 4 : 3 (b) 3 : 2
(c) 2 : 1 (d) None of these

9. X, Y and Z are partners with capitals of ₹4,00,000, ₹3,00,000 and ₹1,00,000 respectively. On Z’s
retirement, his share is acquired by X and Y in the ratio of 3 : 2 respectively. Gaining ratio will be: 1
(a) 4 : 3 (b) 3 : 1
(b) 4 : 1 (d) 3 : 2

10. A, B and C are partners in a business. B retired from the business, when his capital a/c, after all necessary
adjustments, showed a balance of ₹1,09,500. It was agreed that he should be paid ₹49,500 cash on
retirement and the balance in three equal yearly instalments with interest at 12% per annum. Amount of
last instalment with interest will be: 1
(a) ₹22,400 (b) ₹22,300
(c) ₹22,200 (d) ₹22,100

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 11. Gaining ratio may be applied when: 1
(a) a partner is admitted (b) a partner retires
(c) a business is sold out (d) a partner is insolvent

12. Claim of the retiring partner is payable in which of the following form: 1
(a) Fully paid in cash
(b) Fully transferred to loan a/c with some interest on it
(c) Partly in cash and partly as loan repayment with agreed interest
(d) Any of the above

13. On the retirement of Hari from the firm of Hari, Ram and Sharma, the balance sheet showed a debit
balance of ₹12,000 in the Profit and Loss Account. For calculating the amount payable to Hari this
balance will be transferred: 1
(a) To the credit of the capital accounts of Hari, Ram and Sharma equally.
(b) To the debit of the capital accounts of Hari, Ram and Sharma equally.
(c) To the debit of the capital accounts of Ram and Sharma equally.
(d) To the credit of the capital accounts of Ram and Sharma equally.

14. Give the journal entry to distribute ‘Workmen Compensation Reserve’ of ₹70,000 at the time of
retirement of Neeti, when there is a claim of ₹25,000 against it. The firm has three partners Raveena,
Neeti and Rajat. 1

15. Give the journal entries to distribute ‘Workmen Compensation Reserve’ of ₹60,000 at the time of
retirement of Sajjan, when there is a claim of ₹75,000 against it. The firm has three partners Rajat,
Sajjan and Kavita. 1

16. [When only one of the remaining partners gain] A, B and C were partners sharing profits and losses
in the ratio of 5:4:3 respectively. Goodwill appeared in their books at a value of ₹60,000. On that
date, C decided to retire and the remaining partners decided to share the future profits in the ratio of
2:1. Goodwill of the entire firm was fixed at ₹72,000 and it was decided that C’s share of goodwill be
adjusted in the accounts of A and B. Pass journal entry for the same. 3

17. [When one/two of the remaining partners also sacrifice their share] Amar, Ram,
Mohan and Sohan were partners in a firm sharing profits in the ratio of 2 : 2 : 2 : 1. On 31st
January, 2023 Sohan retired. On Sohan’s retirement the goodwill of the firm was valued at
₹70,000. The new profit sharing ratio between Amar, Ram and Mohan was agreed as 5:1:1.
Showing your working notes clearly, pass the journal entry for the treatment of goodwill in the books
of the firm on Sohan’s retirement. 4

18. X, Y and Z are partners in a firm sharing profits and losses in the ratio of 4 : 1 : 1. On April 1st, 2023, X
retires from the firm. On the date of X’s retirement, the book of the firm shows following balances:
(i) General Reserve ₹24,000
(ii) Profit and Loss Account (Dr.) ₹18,000
(iii) Investment Fluctuation Reserve ₹30,000

Record necessary journal entries in the books of the firm at the time of Y’s retirement. 4
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 19. Lalit, Madhur and Neena were partners sharing profits as 50% , 30% and 20% respectively. On March
31, 2013 their Balance Sheet was as follows :

On this date, Madhur retired and Lalit and Neena agreed to continue on the following terms:
(i) The goodwill of the firm was valued at ₹51,000.
(ii) There was a claim for workmens’ compensation to the extent of ₹6,000.
(iii) Investments were brought down to ₹15,000.
(iv) Provision for bad debts was reduced by 1,000.
(v) Madhur was paid 10,300 in cash and the balance was transferred to his loan account payable in
two equal instalments together with interest @ 12% p.a.

Prepare Revaluation Account, Partners’, Capital Accounts and Madhur’s Loan Account till the loan is
finally paid off. 6

20. M, N and G were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. On 31-3-2023 their
Balance Sheet was as under:

2023

M retired on the above data and it was agreed that:

(i) Debtors of 2,000 will be written off as bad debts and a provision of 5% on debtors for bad and
doubtful debts will be maintained.

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 (ii) Patents will be completely written off and stock, machinery and building will be depreciated by
5%.
(iii) An unrecorded creditor of 10,000 will be taken into account.
(iv) N and G will share the future profits in the ratio 2 : 3.
(v) Goodwill of the firm on M’s retirement was valued at 3,00,000.

Pass necessary Journal entries for the above transactions in the books of the firm on M’s retirement. 6

21. A, B and C were in partnership sharing profits in proportion to their capitals. Their Balance Sheet on
31-03-2023 was as follows :

On the above date, B retired owing to ill health and the following adjustments were agreed upon:
(i) Buildings be appreciated by 10%.
(ii) Provision for doubtful debts be increased to 5% on debtors.
(iii) Machinery be depreciated by 15%.
(iv) 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.
(v) A provision be made for outstanding repairs bill of 3,000.
(vi) Included in the value of creditors is 1,800 for an outstanding legal claim, which is not likely to
arise.
(vii) Out of the insurance premium paid 2,000 is for the next year. The amount was debited to Profit
and Loss A/c.
(viii) The partners decide to fix the capital of the new firm as 1,20,000 in the profit sharing ratio.
(ix) B to be paid 9,000 in cash and the balance to be transferred to his Loan Account.

Prepare the Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the new firm
after B’s retirement. 6

22. On 31st March, 2023 the Balance Sheet of M/s Ram, Hari and Mohan sharing profits and losses in the
ratio of 2 : 3 : 2, stood as follows :

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 On 31st March, 2023, Hari desired to retire from the firm and the remaining partners decided to carry
on. It was agreed to revalue the Assets and Liabilities on that date on the following basis :
(i) Land and Buildings be appreciated by 30%.
(ii) Machinery be depreciated by 20%.
(iii) Closing Stock to be valued at 4,50,000.
(iv) Provision for bad debts be made at 5%.
(v) Old credit balances of Sundry Creditors 50,000 be written back.
(vi) Unrecorded investment was sold for 3,50,000.
(vii) Goodwill of the entire firm be valued at 6,30,000 and Hari’s share of the Goodwill be adjusted in
the accounts of Ram and Mohan who share the future profits and losses in the ratio of 3 : 2.
(viii) The total capital of the firm is to be the same as before retirement and individual capital to be in
their profit sharing ratio.

Prepare the Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the new firm
after Hari’s retirement. 8

23. A, B and C were partners sharing profits in the ratio 5 : 3 : 2 respectively. Their summarised Balance
Sheet was as follows :

C retired on 01-04-2023. It was agreed that:

(i) Machinery be revalued at 4,80,000.
(ii) C’s interest in the firm is valued at 1,88,000 after taking into consideration revaluation of assets,
liabilities and accumulated profits/losses etc.
(iii) The entire sum payable to C is to be brought in by A and B in such a way that their capital should
be in their new profit sharing ratio of 2 : 1.
(iv) A cash balance of 17,000 should be kept in the firm as minimum balance.

Prepare Revaluation Account, Partners’ Capital Accounts, Cash Account and Balance Sheet of the new
firm. 6

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

2023

Fill in the missing figures in Revaluation Account, Partners’ Capital A/cs and Balance Sheet of the New Firm.

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  6

CBSE SAMPLE PAPER 1 (2023-24)

RETIREMENT OF A PARTNER
1. G, S and T were partners sharing profits in the ratio 3 : 2 : 1. G retired and his dues towards the
firm including Capital balance, Accumulated profits and losses share, Revaluation Gain amounted
to ₹ 5,80,000. G was being paid ₹ 7,00,000 in full settlement. For giving that additional amount of
₹ 1,20,000, S was debited for ₹ 40,000. Determine goodwill of the firm. 1
(a) ₹ 1,20,000 (b) ₹ 80,000
(c) ₹ 2,40,000 (d) ₹ 3,60,000

2. Anshul, Babita and Chander were partners in a firm running a successful business of car accessories.
They had agreed to share profits and losses in the ratio of 1/2 : 1/3 : 1/6 respectively. After running
business successfully and without any disputes for 10 years, Babita decided to retire due to old age and
the Anshul and Chander decided to share future profits and losses in the ratio of 3 : 2. The accountant
passed the following journal entry for Babita share of goodwill and missed some information. Fill in the
missing figures in the following Journal entry and calculate the gaining ratio. 3

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 3. L, M and N were partners in a firm sharing profit & losses in the ratio of 2 : 2 : 3. On 31st March 2023,
their Balance Sheet was as follows:

On 31st March 2023, M retired from the firm and remaining partners decided to carry on business. It
was decided to revalue assets and liabilities as under :
(a) Land and Building be appreciated by ₹ 2,40,000 and Machinery be depreciated 10%.
(b) 50% of investments were taken by the retiring partner at book value.
(c) Provision for doubtful debts was to be made at 5% on debtors.
(d) Stock will be valued at market price which is ₹ 1,00,000 less than the book value.
(e) Goodwill of the firm be valued at ₹ 5,60,000. L and N decided to share future profits and losses in
the ratio of 2 : 3.
(f) The total capital of the new firm will be ₹ 32,00,000 which will be in proportion of profitsharing
ratio of L and N.
(g) Gain on revaluation account amounted to ₹ 1,05,000.

Prepare Partners’ Capital Accounts and Balance Sheet of firm after M’s retirement. 6

CBSE SAMPLE PAPER 2 (2023-24)

RETIREMENT OF A PARTNER
1. Neil, Nitin and Nitesh were partners in the firm sharing profits and losses equally. Neil retires from the
firm and on his retirement, he is entitled for the payment due to him after all the adjustments.

At the time of retirement, if nothing is mentioned about the payment made due to him, in which account,
the amount will be transferred: 1
(a) Retiring Partner’s Current A/c (b) Retiring Partner’s Capital A/c
(c) Retiring Partner’s Loan A/c (d) Retiring Partner’s Bank A/c

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 2. Mac, Jack and Lac were partners in a firm sharing profits and losses in the ratio of 2:2:1 1

Balance Sheet (extract) as

at 31st March, 2023

Liabilities (Rs) (Rs) Assets (Rs)

Workmen’s Compensation 5,00,000
Reserve

On Jack’s retirement from the firm on 1st April, 2023, he had a balance of Rs.8,00,000 (cr.) in his capital
account. The liability of Workmen’s Compensation Reserve was Rs. 5, 75,000. You are required to pass
journal entries and show how much amount is transferred to his loan account? 1

3. Mark, Musk and Alen were partners in a firm sharing profits in 2:2:1 ratio, On 31.3.2023 Alen retires
from the firm. On the date of Alen’s retirement the Balance Sheet of the firm was as follows:

On Alen’s retirement it was agreed that:

(a) Premises will be appreciated by 5%.
(b) Furniture will be appreciated by Rs. 2,000.
(c) Stock will be depreciated by 10%.
(d) Provision for bad debts was to be made at 5% on debtors.
(e) Provision legal damages to be made for Rs. 14,400.
(f) Goodwill of the firm is valued at Rs. 48,000.
(g) Rs. 50,000 from Alen’s Capital A/c will be transferred to his Loan A/c and balance will be paid by
cheque.

Prepare Revaluation A/c, Partners Capital A/c’s and Balance Sheet of Mark and Musk after Alen’s
Retirement. 6

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