Question:
Chandan, Deepak and Elvish were partners in a firm sharing profits and losses in the ratio of 1 : 2 : 2. Their Balance Sheet as at 31st March, 2024 stood as follows:
Balance Sheet of Chandan, Deepak and Elvish as at 31st March, 2024
Liabilities Amount (₹) Assets Amount (₹) Capitals: Fixed Assets 27,00,000 Chandan 7,00,000 Stock 3,00,000 Deepak 5,00,000 Debtors 2,00,000 Elvish 3,00,000 Cash 1,00,000 General Reserve 4,50,000 Creditors 13,50,000 Total 33,00,000 Total 33,00,000
Chandan retired from the firm on 1st April, 2024 on the following terms:
[(i)] Fixed assets were to be depreciated by 10%.
[(ii)] Debtors of ₹ 30,000 were to be written off as bad debts.
[(iii)] Goodwill of the firm was valued at ₹ 6,00,000 and the retiring partner’s share is adjusted through the capital accounts of the remaining partners.
[(iv)] Chandan was paid through cash brought in by Deepak and Elvish in such a way so as to make their capitals proportionate to their new profit sharing ratio.
Prepare Revaluation Account and Partners’ Capital Accounts.
Chandan, Deepak and Elvish were partners in a firm sharing profits and losses in the ratio of 1 : 2 : 2. Their Balance Sheet as at 31st March, 2024 stood as follows:
Chandan retired from the firm on 1st April, 2024 on the following terms:
[(i)] Fixed assets were to be depreciated by 10%.
[(ii)] Debtors of ₹ 30,000 were to be written off as bad debts.
[(iii)] Goodwill of the firm was valued at ₹ 6,00,000 and the retiring partner’s share is adjusted through the capital accounts of the remaining partners.
[(iv)] Chandan was paid through cash brought in by Deepak and Elvish in such a way so as to make their capitals proportionate to their new profit sharing ratio. Prepare Revaluation Account and Partners’ Capital Accounts.
Balance Sheet of Chandan, Deepak and Elvish as at 31st March, 2024
| Liabilities | Amount (₹) | Assets | Amount (₹) |
|---|---|---|---|
| Capitals: | Fixed Assets | 27,00,000 | |
| Chandan | 7,00,000 | Stock | 3,00,000 |
| Deepak | 5,00,000 | Debtors | 2,00,000 |
| Elvish | 3,00,000 | Cash | 1,00,000 |
| General Reserve | 4,50,000 | ||
| Creditors | 13,50,000 | ||
| Total | 33,00,000 | Total | 33,00,000 |
[(i)] Fixed assets were to be depreciated by 10%.
[(ii)] Debtors of ₹ 30,000 were to be written off as bad debts.
[(iii)] Goodwill of the firm was valued at ₹ 6,00,000 and the retiring partner’s share is adjusted through the capital accounts of the remaining partners.
[(iv)] Chandan was paid through cash brought in by Deepak and Elvish in such a way so as to make their capitals proportionate to their new profit sharing ratio. Prepare Revaluation Account and Partners’ Capital Accounts.
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Always use gaining ratio for goodwill adjustment when a partner retires, and ensure final capital balances are in new agreed ratio.
Updated On: Jul 7, 2025
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Solution and Explanation
Prepare Revaluation Account to incorporate:
10% depreciation on fixed assets,
Bad debts adjustment on debtors. Distribute profit/loss from revaluation in the old ratio. Adjust goodwill (\₹ 6,00,000) using gaining ratio of Deepak and Elvish. Reflect payment to Chandan using new capital contribution by Deepak and Elvish to match their new capital ratio.
10% depreciation on fixed assets,
Bad debts adjustment on debtors. Distribute profit/loss from revaluation in the old ratio. Adjust goodwill (\₹ 6,00,000) using gaining ratio of Deepak and Elvish. Reflect payment to Chandan using new capital contribution by Deepak and Elvish to match their new capital ratio.
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