Question

X, Y and Z are partners in a firm sharing profits and losses in the ratio of 3:2:1. retires from the firm 31st March, 2016. On the date of Z’s retirement, the following balances appeared in the books of the firm General Reserve Rs.1,80,000 Profit and Loss Account (Dr.) Rs.30,000 Workmen Compensation Reserve Rs.24,000 which was no more required Employees’ Provident Fund Rs.20,000. Pass necessary Journal entries for the adjustment of these items on Z’s retirement.

Answer 1

Working Note :

1. Calculation of share in credit balance of reserve

Total credit Balance of Reserves

= general reserve + WCF 

= 1,80,000 +24,000

= 2,04,000

2. Calculation of share in debit balance of profit and loss A/C

Note: Emplyment 'provident fund will not distributed as it is a liability and not accumulated profit.