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Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce PDF Download

Q1: What is meant by gaining ratio on retirement of a partner.
Ans:
The ratio in which the continuing partners acquire the outgoing partner’s share is called as gaining ratio.

Q2: Aman, Yatin and Uma were partners and were sharing profits and losses in the ratio of 5 : 3 : 2. Uma retired and her share was taken over by Aman and Yatin 5 : 3 in ratio. Calculate gaining ratio of Aman and Yatin.
Ans:
Calculation of Gaining Ratio
Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
Gaining ratio of Aman and Yatin = 10 : 6 = 5 : 3.

Q3: X, Y and Z are partners sharing profits in the ratio of  Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce Find the new ratio of remaining partners, if Z retires.
Ans:
Old ratio of X : Y : Z =Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
= 5 : 4 : 1
Z retires, after striking of the retiring Parmer’s ratio, remaining ratio will be new profit sharing ratio, i.e. 5 : 4.

Q4: X, Y and Z were partners sharing profits in the ratio of  Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce X retired from the firm. Calculate the gaining ratio of the remaining partners.
Ans:
Old ratio of X : Y : Z = Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
= 5 : 3 : 2
X retired, after striking of the retiring partner’s ratio, remaining ratio will be new profit sharing ratio, i.e. 3 : 2,
New profit sharing ratio = Y : Z = 3 : 2
Gaining Ratio = New Share – Old Share
Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
Gaining ratio = 3 : 2.

Q5: Give any one distinction between sacrificing ratio and gaining ratio.
Ans:
The difference between sacrificing ratio and gaining ratio is stated below
Sacrificing ratio:
It is the ratio in which old partners agree to sacrifice their share of profit in favour of new partner(s).
Gaining ratio:
It is the ratio in which continuing partners acquire the share of profit from outgoing partner(s).

Q6: (i) K, L and Z are partners sharing profits in the ratio of 4 : 3 : 2 respectively. L retired and surrendered 1/9th of his share of profit to K and remaining in favour of Z. Calculate the new profit sharing ratio of K and Z.
(ii) Arun, Varun and Charan are partners sharing profits in the ratio of 1/2, 3/10, and 1/5 respectively. Varun retired from the firm and Arun and Charan decided to share future profits in 3 : 2 ratio. Calculate gaining ratio of Arun and Charan.
Ans: 
(i) Old ratio between K, L and Z = 4 : 3 : 2.
Share surrendered in favour of K by L
Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
Share surrendered in favour of Z by L
Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
∴ New ratio = 39 : 42 or 13 : 14
(ii) Old ratio between Arun, Varun and Charan
Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
New ratio between Arun and Charan = 3 : 2
Gaining Ratio = New Share – Old Share
Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce.

Q7: Aman, Bimal and Deepak are partners sharing profits in the ratio of 2 : 3 : 5 . The goodwill of the firm has been valued at ₹ 37,500. Aman retired, Bimal and Deepak decided to share profits equally in future. Calculate gain/sacrifice of Bimal and Deepak on Aman’s retirement and also pass necessary journal entry for the treatment of goodwill.
Ans: 
Calculation of Sacrificing or Gaining Ratio
Sacrificing Ratio = Old share – New share
Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
Aman’s Share of Goodwill = 37,500 × (2/10) = ₹ 7,500
Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce

Q8: Neetu, Meetu and Teetu were partners in a firm. On 1st January, 2018, Meetu retired. On Meetu’s retirement, the goodwill of the firm was valued at X 4,20,000. Pass necessary journal entry for the treatment of goodwill on Meetu’s retirement.
Ans:

Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
Working Note:
meetu’s share of goodwill = 4,20,000 × (1/3) = 1,40,000.

Q9: Why are heirs of a retiring/deceased partner entitled to the share of goodwill of the firm?
Ans:
The retiring or deceased partner is entitled to his share of goodwill at the time of retirement/death because the goodwill has been earned by the firm at the time when he was a partner.

Q10: P, Q and R were partners in a firm sharing profits in the ratio of 5 : 4 : 3 respectively. Their capitals were ₹ 50,000, ₹ 40,000 and ₹ 30,000 respectively. State the ratio in which the goodwill of the firm, amounting to ₹ 6,00,000, will be adjusted in the capital accounts of the remaining partners on the retirement of Q.
Ans: 
The goodwill will be adjusted in the gaining ratio of the continuing partners.

Q11: For which share of goodwill, a partner is entitled at the time of his retirement?
Ans:
At the time of retirement, a partner is entitled to get an amount equal to his share out of firm’s goodwill.

Q12: P, Q and R were partners in a firm sharing profits in the ratio of 5 : 4 : 3. Their capitals were ₹ 40,000, ₹ 50,000 and ₹ 1,00,000 respectively. State the ratio in which the goodwill of the firm amounting to ₹ 1,20,000 will be adjusted on the retirement of R.
Ans:
R’s share of goodwill, i.e. ₹ 30,000 (1,20,000 × 3/12) will be contributed by P and Q in their gaining ratio, i.e. 5 : 4.

Q13: State the need for treatment of goodwill on the retirement of a partner.
Ans:
At the time of retirement, retiring partner sacrifices his share of profit in favour of continuing partners, so the remaining partners compensate the retiring partner a share of the firm’s goodwill.

Q14: Kavi, Ravi, Kumar and Guru were partners in a firm sharing profits in the ratio of 3 : 2 : 2 : 1. On 1st February, 2017, Guru retired and the new profit sharing ratio decided between Kavi, Ravi and Kumar was 3 : 1 : 1. On Guru’s retirement, the goodwill of the firm was valued at ₹ 3,60,000. Showing your working notes clearly, pass necessary journal entry in the books of the firm for the treatment of goodwill on Guru’s retirement.
Ans:

Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
Working Notes:

  • Calculation of Gaining Ratio
    Gaining Ratio = New Share – Old Share
    Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
    Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
  • Calculation of Share of Goodwill
    Guru’s share of goodwill = 3,60,000 × (1/8) = ₹ 45,000
    Kavi gains = 3,60,000 × (9/40) = ₹ 81,000
    Ravi sacrifices = 3,60,000 × (2/40) = ₹ 18,000
    Kumar sacrifices = 3,60,000 × (2/40) = ₹ 18,000


Q15: Arjun, Bheem and Nakul are partners sharing profits and losses in the ratio of 14 : 5 : 6 respectively. Bheem retires and surrenders his 5/25th share in favour of Arjun. The goodwill of the firm is valued at 2 years purchase of super profits based on average profits of last 3 years. The profits of the last three years are ₹ 50,000, ₹ 55,000 and ₹ 60,000 respectively. The normal profits of the similar firms are ₹ 30,000. Goodwill already appears in the books of the firm at ₹ 75,000. The profit for the first year after the Bheem’s retirement was ₹ 1,00,000. Give necessary journal entries to adjust goodwill and distribute profits showing your workings.
Ans:

Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
Working Notes:

  • Calculation of New Profit Sharing Ratio and Gaining Ratio
    Old ratio of Aijun, Bheem and Nakul = 14 : 5 : 6
    Bheem surrenders in favour of Arjun = (5/25)th share, Arjun’s new share = (14/25) + (5/25) = (19/25)
    New ratio of Aijun and Nakul = 19 : 6
    Gaining Ratio = New Share – Old Share
    Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
  • Calculation of Bheem’s Share of Goodwill
    Actual average profit = Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce = ₹ 55,000; Normal profit = ₹ 30,000
    Super Profit = Average Profit – Normal Profit = 55,000 – 30,000 = ₹ 25,000
    Firm’s goodwill = 25,000 × 2 = ₹ 50,000
    Bheem’s share of goodwill = 50,000 × (5/25) = ₹ 10,000 (to be contributed by Arjun alone)


Q16: P, Q and R were partners in a firm. On 31st March, 2018 R retired. The amount payable to R ₹ 2,17,000 was transferred to his loan account. R agreed to receive interest on this amount as per the provisions of Partnership Act, 1932. State the rate at which interest will be paid to R.
Ans: 
As per the provisions of Partnership Act, 1932, the rate of interest payable to R will be 6% per annum.

Q17: Give the journal entry to distribute ‘workmen compensation reserve of ₹ 60,000 at the time of retirement of Sajjan, when there is no claim against it. The firm has three partners Rajat, Sajjan and Kavita.
Ans:

Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
NOTE Since, the profit sharing ratio is not given, it is distributed equally.

Q18: Give the journal entry to distribute workmen compensation reserve of ₹ 70,000 at the time of retirement of Neeti, when there is a claim of ₹ 25,000 against it. The firm has three partners Raveena, Neeti and Rajat.
Ans:

Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
NOTE Since, the profit sharing ratio is not given, it is distributed equally.

Q19: Ram, Mohan and Sohan were partners in a firm sharing profits in the ratio of 4 : 3 : 2. Mohan retired and his share was taken over equally by Ram and Sohan. In which ratio will the profit or loss on revaluation of assets and liabilities on the retirement of Mohan be transferred to the capital accounts of the partners?
Ans: 
The profit or loss on revaluation of assets and liabilities on the retirement of Mohan will be transferred to the capital accounts of the partners in their old ratio, i.e. 4 : 3 : 2.

Q20: Banwari, Girdhari and Murari are partners in a firm sharing profits and losses in the ratio of 4 : 5 : 6. On 31st March, 2014, Girdhari retired. On that date the capitals of Banwari, Girdhari and Murari before the necessary adjustments stood at ₹ 2,00,000, ₹ 1,00,000 and ₹ 50,000, respectively. On Girdhari’s retirement, goodwill of the firm was valued at ₹ 1,14,000. Revaluation of assets and re-assessment of liabilities resulted in a profit of ₹ 6,000. General reserve stood in the books of the firm at ₹ 30,000.
The amount payable to Girdhari was transferred to his loan account. Banwari and Murari agreed to pay Girdhari two yearly instalments of ₹ 75,000 each including interest @ 10% per annum on the outstanding balance during the first two years and the balance including interest in the third year. The firm closes its books on 31st March every year.
Prepare Girdhari’s loan account till it is finally paid showing the working notes clearly.
Ans:

Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce
Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce

The document Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 | Accountancy Class 12 - Commerce is a part of the Commerce Course Accountancy Class 12.
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FAQs on Worksheet Solutions: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- 1 - Accountancy Class 12 - Commerce

1. What is the process for reconstituting a partnership firm after the retirement or death of a partner?
Ans. The process for reconstituting a partnership firm after the retirement or death of a partner involves several steps. First, the remaining partners must agree on the terms of the reconstitution, including the treatment of the retiring or deceased partner's capital, share of profits, and liabilities. Then, a new partnership deed should be drafted to reflect the changes in the partnership, including the addition of any new partners. Finally, the reconstitution should be registered with the relevant authorities, such as the Registrar of Firms, to make it legally valid.
2. How is the retiring partner's share of profits and capital determined in the reconstitution of a partnership firm?
Ans. The retiring partner's share of profits and capital in the reconstitution of a partnership firm is usually determined based on the terms agreed upon by the partners. This can be done in several ways. One common method is to calculate the retiring partner's share based on the average profits earned by the firm over a certain period, such as the past three years. Another approach is to negotiate a lump sum payment to the retiring partner, which may be based on the value of their capital or the anticipated future profits of the firm.
3. What happens to the liabilities of a retiring or deceased partner in the reconstitution of a partnership firm?
Ans. In the reconstitution of a partnership firm, the liabilities of a retiring or deceased partner are typically transferred to the remaining partners. This means that the remaining partners become responsible for settling any outstanding debts or obligations of the firm. However, it is important to note that the retiring or deceased partner's personal assets may still be liable for the repayment of these liabilities. It is advisable to consult with a legal professional to ensure that the transfer of liabilities is handled properly and in accordance with the partnership deed and relevant laws.
4. Can a retired partner continue to have any involvement or control in the partnership after their retirement?
Ans. Whether a retired partner can continue to have any involvement or control in the partnership after their retirement depends on the terms agreed upon by the partners. In some cases, a retired partner may be allowed to retain a certain level of involvement, such as acting as a consultant or advisor to the firm. However, it is more common for a retired partner to completely sever their ties with the partnership and have no further involvement or control. This is typically outlined in the partnership deed and should be agreed upon by all the partners.
5. What are the legal requirements for registering the reconstitution of a partnership firm with the Registrar of Firms?
Ans. The legal requirements for registering the reconstitution of a partnership firm with the Registrar of Firms may vary depending on the jurisdiction. However, in general, the following documents and information are typically required: 1. Application for registration of the reconstitution on a prescribed form. 2. The original partnership deed and a copy of the revised partnership deed reflecting the changes in the partnership. 3. Proof of payment of the applicable registration fees. 4. Any other documents or information as required by the Registrar of Firms. It is important to consult with the local authorities or seek professional advice to ensure compliance with the specific requirements in your jurisdiction.
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