Retirement / Death of a Partner

1. X, Y and Z are partners in a firm sharing – profits and losses in the ratio of 4:3:2. Calculate the new profit – sharing ratio when: (i) X retires, (ii) Y retires, (iii) Z retires.

{New profit – sharing ratio: (i) 3:2; (ii) 4:2 or 2:1; (iii) 4:3}

2. Amit, Shyam and Manish are partners sharing profits in the ratio of 1/5: 2/10: 3/10. Find out the new ratio and gaining ratio of the remaining partners: (i) If Amit retires; (ii) If Shyam retires; and (iii) If Manish retires.

{New profit – sharing ratio and Gaining Ratio: (i) 2:3; (ii) 2:3; (iii) 2:2 or 1:1)

3. X, Y and Z were partners sharing profits in the ratio of 1/2, 3/10 and 1/5. Calculate the gaining ratio of remaining partners when Y retires from the firm. 

{CBSE, All India 2014}

{Gaining Ratio = 5:2}

4. R, S and M are partners sharing profits in the ratio of 2/5,2/5 and 1/5. M decides to retire from the business and his share is taken by R and S in the ratio of 1:2. Calculate the new profit – sharing ratio.

{CBSE, Delhi Comptt. 2011} {New profit – sharing ratio = 7:8}

5. A, B and C were partners in a firm sharing profits in the ratio of 8:4:3. B retires and his share is taken up equally by A and C. Find the new profit – sharing ratio. 

{CBSE, Delhi 2009}

{New profit – sharing ratio  –  2:1}

6. A, B and C were partners in the ratio of 17:5:8. B retires and surrenders 2/15 from his share in favour of C and remaining in favour of A. Calculate new profit – sharing ratio and gaining ratio.

{New profit – sharing ratio = 3:2; Gaining Ratio  –  1:4}

7. A, B and C are partners sharing profits in the ratio of 5:3:2. C retires and his share is entirely taken by A. Calculate new profit – sharing ratio of A and B.

{New profit – sharing ratio = 7:3}

8. Hari, Shankar and Gopal are partners sharing profits and losses in the ratio of 1/2, 3/10 and 1/5 respectively. Hari retires and gives his entire share for his son Gopal. Calculate the new ratio.

{New Ratio = 3:7}

9. A, B and C were partners sharing profits in the ratio of 5:3:2. B retires on 1.1.2006 with A and C agreeing to share the profits in future in the ratio of 6:4. Find the gaining ratio. 

{CBSE, All India Comptt. 2006}

{Gaining Ratio = 1:2}

10. M, N and O are partners sharing profits in the ratio of 5:3:2 O retires and the new profit sharing ratio between M and N is 5:3. Calculate the gaining ratio. 

{CBSE, Delhi Comptt. 2008}

{Gaining Ratio = 5:3}

11. A, B, C and D are partners in a firm sharing profits in the ratio 2:2:1:1. B retires and A, C and D decide to share future profits equally. Calculate the gaining ratio.

{A's Gain = 0; C's Gain = 1/6; D's Gain = 1/6; Gaining Ratio between C and D = 1:1}

12. Puja, Priya, Pratistha are partners sharing profits and losses in the ratio of 5:3:2. Puja retires. Her share is taken by Priya and Pratistha in the ratio of 2:1. Calculate the new profit sharing ratio. 

{NCERT}

{New profit – sharing ratio =19:11}

13. A, B and C are partners in a firm sharing profits in the ratio of 6:5:4. C retired and his share is taken up equally by A and B. Find the new profit – sharing ratio. 

{CBSE, Foreign 2009}

{New profit – sharing ratio = 8:7}

14. Rahul, 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. 

{NCERT}

{New profit – sharing ratio: (i) 2:1; (ii) 3:1; (iii) 3:2}

15. A, B and C were partners in the ratio of 8:7:5. On C's retirement, it was agreed that new ratio between A and B will be same as it was between B and C in old firm. Find out new as well as gaining ratio.

{New ratio = 7:5; Gaining Ratio = 11:4}

16. A, B and C were sharing profits and loses in the ratio of 4:3:2. B retires and gifted 1/3rd of his share in favour of A and sells remaining share to A and C equally. Find out new profit – sharing ratio and gaining ratio.

{New profit – sharing ratio = 2:1; Gaining Ratio = 2:1}

17. Ashok, Anil and Ajay are partners sharing profits and losses in the ratio of 1/2, 3/10 and 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. 

{NCERT}

{Gaining Ratio = 1:2}

18. X, Y and Z were partners sharing profits in the ratio of 12:8:5. Y retires and sells 3/25 from his share to X and remaining to Z. Find out new ratio and gaining ratio.

{New Ratio = 3:2; Gaining Ratio 3:5}

19. A, B and C were partners in a firm sharing profits in the ratio of 8:7:5. B retired and his share was taken over by A and C in the ratio of 1:2. Calculate the new profit – sharing ratio of A and C.

{New profit – sharing ratio = 31:29}

20. A, B and C are partners sharing profits in the ratio of 25:15:9. B retires. It is decided that the profit – sharing ratio between A and C will be same as existing between B and C. Calculate new profit – sharing ratio and gaining ratio.

{New profit – sharing ratio = 5:3; Gaining Ratio = 3:5}

21. Anu, 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.

{NCERT}

{New profit – sharing ratio: (a) 13:11; (b) 1:1;

Gaining Ratio: (a) 5:3; (b) 1:1}

22. X, Y and Z are partners sharing profits in the ratio of 4:3:2. Z decides to retire and his share is taken up completely by Y. Find out new profit – sharing ratio. {New profit – sharing ratio = 4:5}

Accounting Treatment of Goodwill

When all the Remaining Partners Gain

23. A, B and C are partners sharing profits in the ratio of 4:3:2. B retires and the goodwill of the firm is valued at Rs. 18,000. Pass journal entry for the treatment of goodwill on B's retirement.

{CBSE, Delhi Comptt. 2008}

{Gaining Ratio = 2:1; Dr. A's Capital A/c by Rs. 4,000, Dr. C's Capital A/c by Rs. 2,000 and Cr. B's Capital A/c by Rs. 6,000}

24. A, B and C are partners. Goodwill has been valued at Rs. 48,000. On C's retirement, A and B agree to share profits in the ratio of 5:3. Pass necessary Journal entry for treatment of C's share of goodwill.

{CBSE, Foreign 2004}

{Gaining Ratio = 7:1; Dr. A's Capital A/c by 1 14,000, Dr. B's Capital A/c by 12,000 and Cr. C's Capital A/c by 1 16,000}

Hint: In the absence of any information, the old ratio between the partners is assumed to be equal.

So, old ratio between A, B and C= 1:1:1.

25. Aparna, Manisha and Sonia are partners sharing profits in the ratio of 3:2:1. Manisha retires and goodwill of the firm is valued at Rs. 1,80,000. Aparna and Sonia decided to share future in the ratio of 3:2. Pass necessary journal entries. 

{NCERT}

{Gaining Ratio = 3:7; Dr. Aparna's Capital A/c by Rs. 18,000, Dr. Sonia's Capital A/c by Rs. 42,000, Cr. Manisha's Capital A/c by Rs. 60,000).

26. Hanny, Pammy and Sunny are partners sharing profits in the ratio of 3:2:1. Goodwill is appearing in the books at a value of Rs. 60,000. Pammy retires and at the time of Pammy's retirement, goodwill is valued at Rs. 84,000. Hanny and Sunny decided to share future profits in the ratio of 2:1. Record the necessary journal entries.

{NCERT}

{To write off the existing Goodwill: Dr Hanny's Capital A/c by Rs. 30,000, Dr. Pammy's Capital A/c by Rs. 20,000, Dr. Sunny's Capital A/c by Rs. 10,000 and Cr. Goodwill A/c by Rs. 60,000; Gaining ratio = 1:1; Dr. Hanny's and Sunny's Capital A/c by Rs. 14,000 each and Cr. Pammy's Capital A/c by 128,000}

27. Ram, Laxman and Bharat are partners sharing profits in the ratio of 3:2:1. Goodwill is appearing in the books at a value of Rs. 1,80,000. Laxman retires and at the time of his retirement, goodwill is valued at Rs. 2,52,000. Ram and Bharat decided to share future profits in the ratio of 2:1. The Profits for the first year after Laxman's retirement amount to Rs. 1,20,000. Give the necessary Journal Entries to record goodwill and to distribute the profits. Show your calculations clearly. 

{CBSE, Foreign 2012}

{To write off existing Goodwill: Dr. Ram's Capital A/c by Rs. 90,000, Dr. Laxman's Capital A/c by Rs. 60,000, Dr. Bharat's Capital A/c by Rs. 30,000 and Cr. Goodwill A/c by Rs. 1,80,000;; To adjust Goodwill: Gaining ratio = 1:1; Dr. Ram's Capital and Bharat's Capital by Rs. 42,000 each and Cr. Laxman's Capital by Rs. 84,000;

{To distribute profits: Dr. Profit and Loss Appropriation A/c by 11,20,000, Cr. Ram's Capital A/c by 180,000 and Cr. Laxman's Capital A/c by Rs. 40,000}

When one / some (and not all) of the remaining partner(s) Gain

28. M, N and O who are partners in a firm sharing profits in the ratio of 3:2:1. Goodwill has been valued at Rs. 60,000. On N's retirement M and O agree to share profits equally. Pass necessary journal entry for treatment of N's sharing of goodwill. 

{CBSE, All India 2005}

{Only O gains; Dr. O's Capital A/c and Cr. N's Capital A/c by Rs. 20,000}

29. Surender, Ramesh, Naresh and Mohan are partners in a firm sharing profits, in the ratio of 2:1:2:1. On the retirement of Naresh, the Goodwill was valued at Rs. 72 ,000. Surender, Ramesh and Mohan decided to share future profits equally. Pass the necessary journal entry for the treatment of goodwill, without opening Goodwill Account.

{Surender's Gain = 0; Gaining Ratio of Ramesh and Mohan =1:1; Dr. Ramesh and Mohan by Rs. 12,000 each and Cr. Naresh by Rs. 24,000}

30. M, N and O are partners in a firm sharing profits in the ratio of 3:2:1. Goodwill has been valued at Rs. 60,000. On N's retirement, M and O agree to share profits equally. Pass the necessary Journal entry for treatment of N's share of goodwill. 

{CBSE, All India 2004}

{Only O is gaining; Dr. O's Capital A/c and Cr. N's Capital A/c by Rs. 20,000}

31. Sangeeta, Saroj and Shanti are partners sharing profits in the ratio of 23:5. Goodwill is appearing in the books at a value of Rs. 60,000. Sangeeta retires and goodwill is valued at Rs. 90,000. Saroj and Shanti decided to share future profits equally. Record necessary journal entries.

{To write off the existing Goodwill: Dr. Sangeeta's Capital A/c by Rs. 12,000, Dr. Saroj's Capital A/c by Rs. 18,000, Dr. Shanti's Capital A/c by Rs. 30,000 and Cr Goodwill A/c by Rs. 60,000; Only Saroj is gaining, Dr. Saroj's Capital A/c by Rs. 18,000 and Cr. Sangeeta's Capital A/c by Rs. 18,000}

32. Deepa, Neeru and Shilpa were partners in a firm sharing profits in the ratio of 5:3:2. Neeru retired and the new profit sharing ratio between Deepa and Shilpa was 2:3. On Neeru's retirement, the goodwill of the firm was valued at Rs. 1,20,000. Record necessary Journal entry for the treatment of goodwill on Neeru's retirement. (NCERT)

{Shilpa's Gain = 4/10, Deepa's Sacrifice = 1/10; Dr. Shilpa's Capital A/c by Rs. 48,000 and Cr. Neeru's Capital A/c by Rs. 36,000 and Cr. Deepa's Capital A/c by Rs. 12,000}

33. A, B and C were partners in a firm Sharing profits in the ratio of 6;5:4. Their Capitals were A: Rs. 1,00,000, B: Rs. 80,000 and C: Rs. 60,000 respectively. On 1st April, 2009, C retired from the firm and the new profit – sharing ratio between A and B was decided as 11:4 on C's retirement, the goodwill of the firm was valued at Rs. 90,000 showing your calculations clearly, pass the necessary journal entry for the treatment of goodwill on C's retirement. 

{CBSE, Ail India 2010}

{A's Gain  –  5/15, B's Sacrifice = 1/15; Dr. A's Capital A/c by Rs. 30,000 and Cr. B's Capital A/c by Rs. 6,000 and Cr. C's Capital A/c by Rs. 24,000}

34. A, B and C were partners in a firm sharing profits in the ratio of 6:5:4. Their capitals were A: Rs. 1,00,000; B: Rs. 80,000 and C: Rs. 60,000 respectively. On 1st April, 2009, A retired from the firm and the new profit – sharing ratio between B and C was decided as 1:4. On A's retirement, the goodwill of the firm was valued at Rs. 1,80,000. Showing your calculations clearly, pass the necessary journal entry for the treatment of goodwill on A's retirement. 

{CBSE, Foreign 2010}

{C's Gain = 8/15, B's Sacrifice = 2/15; Dr. C's Capital A/c by Rs. 96,000 and Cr. A's Capital A/c by Rs. 72,000 and Cr. B's Capital A/c by Rs. 24,000}

Hidden Goodwill

35. X, Y and Z are partners sharing profits in the ratio of 1:2:3. Z retires and his capital, after all adjustments and revaluations stands at Rs. 1,20,000. X and Y agreed to pay him Rs. 1,50,000 in full settlement of his claim. Record necessary journal entry for the treatment of goodwill if the new profit sharing ratio of X and Y is agreed as 1:3.

{Hidden Goodwill = Rs. 30,000; Gaining ratio = 1:5; Dr. X's Capital A/c by Rs. 5,000, Dr. Y's Capital A/c by Rs. 25,000 and Cr. Z's Capital by Rs. 30,000;

36. A, B and C are partners sharing profits in the ratio of 2:3:5. C retires and her capital, after all adjustments and revaluations stands at Rs. 4,25,000. A and B agreed to pay her Rs. 5,75,000 in full settlement of her claim. Record necessary journal entry for the treatment of goodwill if the new profit – sharing ratio of A and B is agreed as 1:2.

{Hidden Goodwill = Rs. 1,50,000; Gaining ratio = 4:11; Dr. A's Capital A/C by Rs. 40,000, Dr. B's Capital A/c by Rs. 1,10,000 and Cr. C's Capital by Rs. 1,50,000}

Adjustment of Reserves, Accumulated Profits and Losses

37. X, Y and Z are partners in a firm sharing profits in the ratio of 5:3:2. Z retires and on that date, profit and loss account showed a debit balance of Rs. 60,000. X and Y decided to share future profits and losses in the ratio of 3:2. Show the necessary journal entry for the treatment of profit and loss account balance on Z's retirement.

{Distribute Accumulated loss (Dr. balance of profit and loss) between all the partners: Dr. X's Capital A/c by Rs. 30,000, Dr. Y's Capital A/c by Rs. 13,000, Dr. Z's Capital A/c by Rs. 12,000 and Cr. Profit and Loss A/c by Rs.60,000};

38. Naresh, Raj Kumar and Bishwajeet are equal partners. Raj Kumar decides to retire. On the date of his retirement, the Balance Sheet of the firm showed the following: General Reserves Rs. 36,000 and Profit and Loss Account (Dr.) Rs. 15,000. Pass the necessary journal entries to the above effect.

{NCERT}

{For General Reserve: Dr. General Reserve A/c by Rs. 36,000, Cr. Naresh's Capital A/c by Rs. 12,000, Cr. Raj Kumar's Capital A/c by Rs. 12,000. Cr. Bishwajeet's Capital A/c by Rs. 12,000; For Profit and Loss A/c (Dr. Balance): Dr. Naresh's Capital A/c by Rs.5,000, Dr. Raj Kumar's Capital A/c by Rs. 5,000, Dr. Bishwajeet's Capital A/c by Rs. 5,000 and Cr. Profit and Loss A’c by Rs. 15,000};