Question

R, S and T were partners in a firm, sharing profits in 2 : 2 : 1 ratio. On 31-03-2016, their balance sheet was as follows :

S retired from the firm on 01-04-2016 and his share was ascertained on the revaluation of assets as follows : Stock Rs 40,000; furniture Rs 6,000; Plant and machinery Rs 18,000; building Rs 40,000; Rs 1,700 were to be provided for doubtful debts. The goodwill of the firm was valued at Rs 12,000. S was to be paid Rs 18,080 in cash on retirement and the balance in three equal yearly installments.
Prepare Revaluation account, Partners’ Capital account; S’s Loan account and Balance Sheet on 01-04-2016.

Answer 1

Working Note: Gain Ratio = New Ratio – Old Ratio
In the question, old ratio is given, new ratio is not given. So, if new ratio is not given adjustment of goodwill do in old ratio.
After S’s retirement, remaining partner’s profit sharing ratio will be 2 : 1.