Pankaj, Naresh and Saurabh are partners sharing profits in the ratio of 3:2:1. Naresh retired from the firm due to his illness-Solution

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

Books of Pankaj, Naresh and Saurabh
Balance Sheet as on March 31, 2017

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)
General Reserve	12,000	Bank	7,600
Sundry Creditors	15,000	Debtors 6,000
Bills Payable	12,000	Less:Provision for Doubtful Debt 400	5,600
Outstanding Salary	2,200
Provision for Legal Damages	6,000	Stock	9,000
Capitals:		Furniture	41,000
Pankaj    46,000		Premises	80,000
Naresh   30,000
Saurabh 20,000	96,000
	1,43,200		1,43,200

Additional Information:
(i) Premises have appreciated by 20%, stock depreciated by 10% and provision for doubtful debts was to be made 5% on debtors. Further, provision for legal damages is to be made for Rs 1,200 and furniture to be brought up to Rs 45,000.
(ii) Goodwill of the firm be valued at Rs 42,000.
(iii) Rs 26,000 from Naresh’s Capital account be transferred to his loan account and balance be paid through bank; if required, necessary loan may be obtained from Bank.
(iv) New profit sharing ratio of Pankaj and Saurabh is decided to be 5:1.
Give the necessary ledger accounts and balance sheet of the firm after Naresh’s retirement.

SOLUTION

Books of Pankaj, Naresh and Saurabh

Realisation A/c

Particulars		Amount (Rs.)	Particulars	Amount (Rs.)
To Stock		900	By Premises	16,000
To Provision for legal damages		1,200	By Provision for doubtful debts	100
To Profit transfered to partners capital A/c:			By Furniture	4,000
Pankaj	9,000
Naresh	6,000
Saurabh	3,000	18,000
		20,100		20,100

Partner’s Capital A/c

Particulars	Pankaj	Naresh	Saurabh	Particulars	Pankaj	Naresh	Saurabh
To Naresh’s Capital A/c	14,000			By balance b/d	46,000	30,000	20,000
To Naresh’s Loan A/c		26,000		By general Reserve	6,000	4,000	2,000
To Bank A/c		28,000		By Revaluation A/c	9,000	6,000	3,000
To balance c/d	47,000		25,000	By Pankaj’s capital A/c		14,000
	61,000	54,000	25,000		61,000	54,000	25,000

Bank A/c

Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
To balance b/d	7,600	By Naresh’s Capital A/c	28,000
To Bank loan (balancing figure)	20,400
	28,000		28,000

Books of Pankaj, Naresh and Saurabh

Balance Sheet as on March 31, 2017

Liabilities	Amount Rs	Assets	Amount Rs
By Sundry Creditors	15,000	To Debtors 6,000
By Bills Payable	12,000	Less:Provision for Doubtful Debt 300	5,700
By Outstanding Salary	2,200
By Provision for Legal Damages	7,200	To Stock	8,100
By Capitals:		To Furniture	45,000
Pankaj     47,000		To Premises	96,000
Saurabh  25,000	72,000
	1,54,800		1,54,800

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