{"id":19876,"date":"2021-03-06T16:25:07","date_gmt":"2021-03-06T10:55:07","guid":{"rendered":"https:\/\/ncertsolutions.guru\/?p=19876"},"modified":"2021-03-06T16:25:07","modified_gmt":"2021-03-06T10:55:07","slug":"ncert-solutions-for-class-12-accountancy-chapter-4","status":"publish","type":"post","link":"https:\/\/ncertsolutions.guru\/ncert-solutions-for-class-12-accountancy-chapter-4\/","title":{"rendered":"NCERT Solutions for Class 12 Accountancy Chapter 4 Reconstitution of Partnership Firm: Retirement \/ Death of a Partner"},"content":{"rendered":"

Detailed, Step-by-Step NCERT Solutions for 12 Accountancy<\/a> Chapter 4 Reconstitution of Partnership Firm: Retirement \/ Death of a Partner Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation.<\/p>\n

Reconstitution of Partnership Firm: Retirement \/ Death of a Partner NCERT Solutions for Class 12 Accountancy Chapter 4<\/h2>\n

Reconstitution of Partnership Firm: Retirement \/ Death of a Partner Questions and Answers <\/span>Class 12 Accountancy Chapter 4<\/h3>\n

Test Your Understanding-I<\/span>
\n[Page No. 187-188]<\/span><\/p>\n

Choose the correct option in the following questions :<\/p>\n

Question 1.
\nAbhishek, Rajat and Vivek are partners sharing profits in the ratio of 5:3:2. If Vivek retires, the New Profit Sharing Ratio,between Abhishek and Rajat will be –
\n(a) 3:2
\n(b) 5:3
\n(c) 5:2
\n(d) None of these
\nAnswer:
\n(b) 5 : 3<\/p>\n

Question 2.
\nThe old profit sharing ratio among Rajender, Satish and Tejpal were 2:2:1. The New Profit Sharing Ratio after Satish’s retirement is 3:2. The gaining ratio is-
\n(a) 3:2
\n(b) 2:1
\n(c) 1:1
\n(d) 2 : 2
\nAnswer:
\n(c) 1: 1
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 3.
\nAnand, Bahadur and Chander are partners sharing profit equally. On Chander’s retirement, his share is acquired by Anand and Bahadur in the ratio of 3:2. The New Profit Sharing Ratio between Anand and Bahadur will be –
\n(a) 8: 7
\n(b) 4:5
\n(c) 3:2
\n(d) 2:3
\nAnswer:
\n(a) 8: 7
\n\"NCERT<\/p>\n

Question 4.
\nIn 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:\u2014
\n(a) Old Profit Sharing Ratio
\n(b) New Profit Sharing Ratio
\n(c) Equal Ratio
\n(d) None of these
\nAnswer:
\n(a) Old Profit Sharing Ratio.<\/p>\n

Test Your Understanding-II<\/span>
\n[Page No. 191]<\/span><\/p>\n

Choose the correct option in the following questipns :<\/p>\n

Question 1.
\nOn retirement\/death of a partner, the retiring\/deceased partner’s capital account will be credited with
\n(a) his\/her share of goodwill.
\n(b) goodwill of the firm.
\n(c) shares of goodwill of remaining partners.
\n(d) none of these.
\nAnswer:
\n(a) his\/her share of goodwill.<\/p>\n

\"NCERT<\/p>\n

Question 2.
\nGobind, Hari and Pratap are partners. On retirement of Gobind, the goodwill already appears in the Balance Sheet at Rs. 24,000. The goodwill will be written-off
\n(a) by debiting all partners’ capital accounts in their old profit sharing ratio.
\n(b) by debiting remaining partners’ capital accounts in their new profit sharing ratio.
\n(c) by debiting retiring partners’ capital accounts from his share of goodwill.
\n(d) none of these.
\nAnswer:
\n(a) by debiting all partner’s capital account in their old profit sharing ratio.<\/p>\n

Question 3.
\nChaman, Raman and Suman are partners sharing profits in the ratio of 5 : 3 : 2. Raman retires, the new profit sharing ratio between Chaman and Suman will be 1:1. The goodwill of the firm is valued at Rs. 1,00,000 Raman’s share of goodwill will be adjusted
\n(a) by debiting Chaman’s Capital Account and Suman’s Capital Account with Rs. 15,000 each.
\n(b) by debiting Chaman’s Capital Account’and Suman’s Capital Account with Rs. 21,429 and Rs. 8,571 respectively.
\n(c) by debiting only Suman’s Capital Account with Rs. 30,000.
\n(d) by debiting Raman’s Capital Account with Rs. 304)00.
\nAnswer:
\n(c) by debiting only Suman’s Capital Account with Rs. 30,000.<\/p>\n

Question 4.
\nOn retirement\/death of a partner, the remaining partner(s) who have gained due to change in profit sharing ratio should compensate the
\n(a) retiring partners only.
\n(b) remaining partners (who have sacrificed) as well as retiring partners.
\n(c) remaining partners only (who have sacrificed).
\n(d) none of these.
\nAnswer:
\n(b) remaining partners (who have sacrificed) as well as retiring partner.<\/p>\n

\"NCERT<\/p>\n

Do it Yourself\u00a0<\/span>
\n[Page No. 182]<\/span><\/p>\n

Question 1.
\nAnita, Jaya and Nisha are partners sharing profits and losses in the ratio of 1:1 :1. Jaya retires from.the firm. Anita and Nisha decided to share the profit in future in the ratio 4:3. Calculate the gaining ratio.
\nAnswer:
\nGaining Ratio = New Ratio – Old Ratio
\nAnita’s Gain = \\( \\frac{4}{7}-\\frac{1}{3}\\)
\n\"NCERT<\/p>\n

Question 2.
\nAzad, Vijay and Amit are partners sharing profits and losses in the proportion of \\(\\frac{1}{4}, \\frac{1}{8} \\text { and } \\frac{10}{16}\\). Calculate the new profit sharing ratio between continuing partners if (a) Azad retires; (b) Vijay retires; (c) Amit retires.
\nAnswer:
\n\"NCERT<\/p>\n

New profit sharing ratio if
\n(a) Azad retires = 1:5
\n(b) Vijay retires = 2:5
\n(c) Amit retires = 2:1<\/p>\n

Question 3.
\nCalculate the gaining ratio in each of the above situations.
\nAnswer:
\nGaining Ratio = New Ratio – Old Ratio
\n(a) If Azad retires :
\n\"NCERT
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 4.
\nAnu, Prabha and Milli are partners. Anu retires. Calculate the future profit sharing ratio of continuing partners and gaining ratio if they agree to acquire her share : (a) in the ratio of 5 : 3; (b) equally.
\nAnswer:
\nOld ratio of Anu, Prabha and Milli = 1:1:1
\nNew profit sharing ratio :
\n\"NCERT
\n\"NCERT
\n\"NCERT
\n\"NCERT<\/p>\n

Question 5.
\nRahul, Robin and Rajesh are partners sharing profits in the ratio of 3 : 2 : 1. Calculate the new profit sharing ratio of the remaining partners if (i) Rahul retires; (ii) Robin retires; (iii) Rajesh retires.
\nAnswer:
\nOld ratio of Rahul, Robin and Rajesh = 3:2:1
\nNew profit sharing ratio if
\n(i) Rahul retires = 2:1
\n(ii) Robin retires =3:1
\n(iii) Rajesh retires = 3:2<\/p>\n

Question 6.
\nPuja, Priya, Pratistha are partners sharing profits and losses in the ratio of 5 : 3 : 2. Priya retires. Her share is taken by Priya and Pratistha in the ratio of 2 :1. Calculate the new profit sharing ratio.
\nAnswer:
\nOld ratio of Puja, Priya and Pratistha = 5:3:2
\n\"NCERT
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 7.
\nAshok, Anil and Ajay are partners sharing profits and 13 losses in the ratio of \\(\\frac{1}{2}, \\frac{3}{10} \\text { and } \\frac{1}{5}\\). Anil retires from the firm. Ashok and Ajay decide to share future profits and losses in the ratio of 3 : 2. Calculate the gaining ratio.
\nAnswer:
\n\"NCERT<\/p>\n

Do it Yourself<\/span>
\n[Page No. 198-199]<\/span><\/p>\n

Question 8.
\nVijay, Ajay and Mohan are friends. They passed B. Com. (Hons.) from Delhi University in June, 2003. They decided to start the business of computer hardware. On 1st of August, 2003, they introduced the capital of Rs. 50,000, Rs. 30,000 and Rs. 20,000 respectively and started the business in partnership at Delhi. The profit sharing ratio decided between there was 4:2:1. The business was running successfully. But on 1st February, 2006, due to certain unavoidable circumstances and family circumstances, Ajay decided to settle in Pune and decided to retire from the partnership on 31st March, 2007; with the consent of partners, Ajay retires as on 31st March, 2007, the position of assets and liabilities are as follows:<\/p>\n

\"NCERT<\/p>\n

On the date of retirement, the following adjustments were to be made:
\n1. Firm’s goodwill was valued at Rs. 1,48,000.
\n2. Assets and Liabilities are to be valued as under: Stock Rs. 72,000; Land and Buildings Rs. 1,35,600; Debtors Rs. 63,000; Machinery Rs. 1,50,000; Creditors Rs. 84,000.
\n3. Vijay to bring Rs. 1,20,000 and Mohan Rs. 30,000 as additional capital.
\n4. Ajay was to be paid Rs. 97,000 in cash and the balance of his Capital Account to be transferred to his Loan Account. Work out the amount due to Ajay and state how will you settle his account.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

Do it Yourself<\/span>
\n[Page No. 209-210]<\/span><\/p>\n

Question 1.
\nThe Balance Sheet of A, B and C who were sharing the profits in proportion to their capitals stood as on March 31,2007.
\nAnswer:
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

B retired on the date of Balance Sheet and the following adjustments were to be made:
\n(a) Stock was depreciated by 10%.
\n(b) Factory building was appreciated by 12%.
\n(c) Provision for doubtful debts to be created up to 5%.
\n(d) Provision for legal charges to be made at Rs. 265.
\n(e) The goodwill of the firm to be fixed at Rs. 10,000.
\n(f) The capital of the new firm to be fixed at Rs. 30,000. The continuing partners decide to keep their capitals in the new profit sharing ratio of 3:2.
\nWork out the final balances in capital accounts of the firm, and the amounts to be brought in and\/or withdrawn by A and C to make their capitals proportionate to then new profit sharing ratio.
\nAnswer:
\n\"NCERT
\n\"NCERT
\n\"NCERT
\n\"NCERT
\n\"NCERT
\n\"NCERT
\n\"NCERT<\/p>\n

(ii) Goodwill:
\nGoodwill of the firm = Rs. 10,000
\nB’s Share = Rs, 10,000 x \\(\\frac{3}{10}\\)
\nRs. 3,000 (Adjusted in the capital accounts of A and C in their gaining ratio i.e. 2:1)<\/p>\n

\"NCERT<\/p>\n

Question 2.
\nR, S and M were carrying on business in partnership sharing profits in the ratio of 3 : 2 : 1, respectively. On March 31, 1999, Balance Sheet of the firm stood as follows :<\/p>\n

\"NCERT<\/p>\n

Shyam retired on the above-mentioned date on the following terms:
\n(a) Buildings to be appreciated by Rs. 8,800
\n(b) Provision for doubtful debts to be made @ 5% on debtors.
\n(c) Goodwill of the firm to be valued at Rs. 9,000.
\n(d) Rs. 5,000 to be paid to S immediately and the balance due to him to be treated as a loan carrying interest @6% per annum.
\nPrepare the balance sheet of the reconstituted firm.
\n\"NCERT
\n\"NCERT<\/p>\n

Do it Yourself<\/span>
\n[Page No. 216]<\/span><\/p>\n

On December 31,2007, the Balance Sheet of Pinki, Qureshi and Rakesh showed as under:
\n\"NCERT
\nThe partnership deed provides that the profit be shared in the ratio of 2:1:1 and that in the event of death of a partner, his executors be entitled to be paid out:
\n(a) The capital of his credit at the date of last Balance Sheet;
\n(b) His proportion of reserves at the date of last Balance Sheet;
\n(c) His proportion of profits to the date of death based on the average profits of the last three completed years, plus 10% and
\n(d) By way of goodwill, his proportion of the total profits for the three preceding years. The net profit for the last three years were:
\n\"NCERT
\nRakesh died on April 1, 2007. He had withdrawn Rs. 5,000 to the date of his death. The investment were sold at par and R’s Executors were paid off. Prepare Rakesh’s Capital Account that of his Executors
\nAnswer:
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Working Notes:
\nShare of profits of Rakesh on the basis of average profits of three years to the date of death will be calculated as follows :
\nAverage profits of the firm for three years :
\n\"NCERT
\n\"NCERT<\/p>\n

Short Answer Type Questions\u00a0<\/span><\/p>\n

Question 1.
\nWhat are the different ways in which a partner can retire from the firm?
\nAnswer:
\nAccording to Section 32 (1) of the Indian Partnership Act, 1932:
\n(i) A partner may retire from the firm with the consent of all the other partners of the firm.
\n(ii) A partner may retire in accordance with an express agreement by the partners.
\n(iii) In case of partnership at will, by giving notice in writing to all the other partners of his intention to retire.
\n(iv) A partner may retire by voluntarily surrender his share in the favour of existing partners and relinquish himself from the affairs of the firm in future.<\/p>\n

Question 2.
\nWrite the various matters that need adjustments at the time of retirement of a partners.
\nAnswer:
\nVarious matters that need adjustment in the books of a firm at the time of retirement of a partner are as follows:
\n1. New profit sharing ratio.
\n2. Gaining ratio.
\n3. Calculation of goodwill and its accounting treatment.
\n4. Distribution of accumulated profits or losses and reserves.
\n5. Revaluation of assets and liabilities.
\n6. Adjustment of Joint Life Policy (in any).
\n7. Settlement of amount due to the retiring partner.
\n8. Adjustment of Capital Accounts in New Profit Sharing Ratio.<\/p>\n

\"NCERT<\/p>\n

Question 3.
\nDistinguish between Sacrificing Ratio and Gaining Ratio.
\nAnswer:
\nSacrificing Ratio\u2014A sacrifice ratio may be defined as the ratio in which the existing partners have surrendered a part of their profit or loss sharing ratio in favour of the new partner. The sacrificing ratio may be calculated as:
\nSacrificing Ratio = Old Ratio – New Ratio Gaining Ratio : The gaining ratio may be defined as the ratio in which the continuing partners acquire the share of retiring\/deceased partner. Gaining Ratio may be calculated as:<\/p>\n

Gaining Ratio = New Ratio – Old Ratio
\nThere are the following points of difference between the two ratios:
\n\"NCERT\u00a0 \u00a0 \"NCERT<\/p>\n

Question 4.
\nWhy do firm revaluate assets and reassess their liabilities on retirement or on the event of death of a partner?
\nAnswer:
\nAt the time of retirement\/ death some of assets may not have been shown at their current values. Similarly, there may be certain liabilities which have been shown at a different from the obligation to be met by the firm. Besides this, there may be unrecorded assets and liabilities which have to be recorded.<\/p>\n

It is necessary that the retiring\/deceased partner is given a share of all profits that have arisen till his retirement or death and is made to bear his share of losses that have occurred till that period. This necessitates revaluation of assets and liabilities.<\/p>\n

In other words, at the time of retirement or death of a partner, assets and liabilities of a firm are revalued on the reasons that they should be shown at current market value and the resultant profit and loss due to difference in the book value and market value be recofded in all partner’s capital accounts and the assets and liabilities comes at right value in the new balance sheet of the new firm.<\/p>\n

Question 5.
\nWhy a retiring\/deceased partner is entitled to a share of goodwill of the firm?
\nAnswer:
\nThe outgoing partner i.e. retiring\/deceased partner is entitled to his share of goodwill at the time of retirement or death because the goodwill has been earned by the firm with the efforts of all the partners. Therefore goodwill is valued as per agreement, at the time of retirement\/death.<\/p>\n

Due to retirement\/death of any partner, the remaining partners make a gain because the future profit will be shared only between the continuing partners. Therefore, the remaining partners should compensate the retiring\/deceased partner for his share of goodwill in the gaining ratio.<\/p>\n

\"NCERT<\/p>\n

Long Answer Type Questions<\/span><\/p>\n

Question 1.
\nExplain the modes of payment to a retiring partner.
\nAnswer:
\nThe retiring partner is entitled for the amount due to him. It is settled as per the terms of partnership deed i.e. in lump sum immediately or in various instalments with or without interest as agreed or partly in cash immediately and partly in instalments.<\/p>\n

In absence of any agreement, Section 37 of the Indian Partnership Act, 1932 is applicable, which states that the retiring partner has an option to receive either interest as the rate of 6% p.a. till the payment of his\/her amount due or such share of profits which has been earned with his\/her money i.e. based on the Capital ratio. The necessary journal entries are as follows:
\n1. If payment (full) is made in cash :
\nRetiring Partner’s Capital A\/c – Dr.
\nTo Cash\/Bank PJc
\n(For the amount paid to retiring partner)<\/p>\n

2. If the amount due to retiring partner is treated as loan :
\nRetiring Partner’s Capital A\/c – Dr.
\nTo Retiring Partner’s Loan A\/c
\n(For the amount due to retiring partner transferred to his loan account)<\/p>\n

\"NCERT<\/p>\n

3. When amount due to retiring partner is partly paid in cash and the remaining amount is treated as loan :
\nRetiring Partner’s Capital A\/c – Dr.
\n(Total Amount due)
\nTo Cash\/Bank A\/c (Amount paid)
\nTo Retiring Partner’s Loan A\/c (Amount of loan)
\n(For the amount due to retiring partner, partly paid in cash and remaining transferred to his loan account)<\/p>\n

4. When loan account is settled by paying in instalment includes principal and interest:
\n(a) For interest due on loan :
\nInterest on Loan A\/c – Dr.
\nTo Retiring Partner’s Loan PJc (For the interest due on Loan of retiring partner)<\/p>\n

(b) For payment of instalment of loan with interest:
\nRetiring Partner’s Loan A\/c – Dr.
\nTo Cash\/Bank A\/c
\n(For the amount paid (Instalment Interest) to retiring partner)
\nThese entries i.e. (a) and (b) repeated till the loan is paid off.<\/p>\n

Question 2.
\nHow will you compute the amount payable to a deceased partner?
\nAnswer:
\nWhenever partner dies, a partnership will come to end immediately, although the firm may continue with the remaining partners by purchasing the share of the deceased partner. When a partner dies, his representatives or the executors of his estate are entitled to all the rights like s.hare of goodwill, share in the gain of the revaluation of assets and liabilities, share in joint life policy, share of undistributed profits, reserves of the deceased partner.<\/p>\n

The executors of deceased partner are entitled to the following :<\/p>\n