Chapter 4: Death of a partner

Important Questions

1. X, Y and Z are partners sharing profit in the ratio of 3 : 2 : 1. Y retires and on the date of Y’s retirement. Goodwill already appears in the books at a value of 48,000. New ratio of X and Y is 3 : 2. Pass the necessary journal entries.

2. X, Y and Z are partners sharing profits in the ratio 3 : 2 : 1. X retires from the partnership. In order to settle his claim the following revaluation of assets and liabilities was agreed upon:s

1. The value of machinery is increased by 50,000.
2. The value of investment is increased by 4,000.
3. A provision for outstanding bill standing in the books at 2,000 is now not required.
4. The value of land & building is decreased by 24,000.

3. Give journal entries if

1. Partners decide to show the revalued amount in the balance sheet.
2. Partners decide to show the original value of assets & liabilities in the balance sheet and Y and Z agree to share profits in the ratio of 2 : 1

Date	Particulars	Amount	Date	Particulars	Amount
	To land & building To partner’s capital A/C X 16,000 X 16,000 X 16,000	24,000 32,000	By machinery A/C By investment A/C By provision for outstanding bill A/C	50,000 4,000 2,000
56,000	56,000

Date	Particulars	Amount	Date	Particulars	Amount
	To land & Building A/C To machinery A/C To investment A/C To provision for outstanding bill A/C X 16,000 Y 10,667 Z 5,333	24,000 50,000 4,000 2,000 32,000	By machinery A/C By investment A/C By provision for outstanding bill A/C By land & Building By partner’s capital A/C X 21,333 Y 10,667	50,000 4,000 2000 24,000 32,000
1,12,000	1,12,000

4. A, B and C are partner’s sharing profit and losses in the ratio of ⅖, ⅖ and ⅕ respectively. C retires, A and B decide to share future profits and losses in the ratio 2 : 1. Calculate the gaining ratio.

4. Aman, Vikram and Sonu are partners sharing profits in the ratio of 4 : 3 : 1. Vikram retires selling his share of profits to Aman & Sonu for Rs. 8,100; Rs. 3,600 paid by Aman and 4,500 paid by Sonu. Profit for the year after Vikram retirement was Rs. 10,500.
You are required:-

1. To give necessary journal entries to record the transfer of Vikram’s share to Aman and Sonu.
2. To calculate new profit sharing ratio and distribute the profits between A and C.

Sample Questions

1. A, B & C are partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1, their balance sheet on 31.12.17
Calculate:-

B died on 31st march 2018 and as per partnership deed his executor were entitled for

1. His capital as on the date of last balance sheet.
2. His share in general reserve.
3. His share of goodwill. The goodwill of the firm was valued at 48,000.
4. His share of accrued profit, calculated on the basis of last year’s profit. The profit for the last year was Rs. 24,000
5. Interest on capital up to the date of death at 9% per annum.
6. Prepare B’s capital account.

2. How will you compute the amount payable to a deceased partner?

3. Discuss the various methods of computing the share in profits in the event of death of a partner.

4. Why do firm revaluate assets and reassers their liabilities on retirement or on the event of death of a partner.

5. Distinguish between sacrificing ratio and gaining tab.

MCQ

1. A,B and C are partners sharing profits in the ratio ½:¼ :¼ . New ratio on the retirement of B will be

(a) 2:4
(b) 1:2
(c) 2:1
(d) 1:1

A,B and C are partners in the ratio 5:4:3. B retires, and A and C decides to share profits equally. Gaining ratio will be -

(a) 1:2

(b) 3:1

(c) 1:3

(d) 4:3

3. After retirement of a partner, the share of the remaining partners will -

(a) increase

(b) decrease

(c) Not change

(d) None of the above

4. A,B and C sharing profit in the ratio 3:2:1 retires from the firm, Goodwill is to be valued at Rs. 60000 find the amount payable to retiring on account of goodwill -

(a) Rs. 30000

(b) Rs. 20000

(c) Rs. 10000

(d) Rs. 60000

5. In the absence of any information regarding the acquisition of share in profit of the retiring/deceased partner by the remaining partners, it is assumed that they will acquire his/her share:-

(a) Old Profit Sharing Ratio

(b) New Profit Sharing Ratio

(c) Equal Ratio

(d) None of these