# Reconstitution Of A Partnership Firm – Retirement/Death Of A Partner Class 12 Accountancy Exam Questions

Please refer to Reconstitution Of A Partnership Firm – Retirement/Death Of A Partner Class 12 Accountancy Exam Questions provided below. These questions and answers for Class 12 Accountancy have been designed based on the past trend of questions and important topics in your class 12 Accountancy books. You should go through all Class 12 Accountancy Important Questions provided by our teachers which will help you to get more marks in upcoming exams.

## Class 12 Accountancy Exam Questions Reconstitution Of A Partnership Firm – Retirement/Death Of A Partner

Class 12 Accountancy students should read and understand the important questions and answers provided below for Reconstitution Of A Partnership Firm – Retirement/Death Of A Partner which will help them to understand all important and difficult topics.

VERY SHORT ANSWERS TYPE QUESTIONS :

Question. Name the account which is opened to credit the share of profit of the deceased partner, till the time of his death to his Capital Account?
Answer : Profit and loss suspense A/c

Question. Give the journal entry to distribute workmen’s compensation reserve of Rs 70000 at the time of retirement when there is a claim of Rs 25000 against it. The partners are R S and T.

Question. A and B were partners sharing profits and losses in ratio 3:2. On April 2018 they decided to admit C for ⅕ th share in the future profits. They had a reserve of 25000, which they wanted to show in their new balance sheet. C agreed and the necessary adjustments were made in the book. On October 1st 2018, A met with an accident and died. B and C de-cided to admit A’s Daughter F in their partnership, who agreed to bring Rs. 200000 as capital. Calculate A’s share in the reserve on the date of her death.
Answer : A’s share of reserve = Rs 12000
NPSR = 12:8:5
A’s share = 25000 x 12/25 = Rs 12000

SHORT ANSWERS TYPE QUESTIONS :

Question. From the following particulars, calculate new profit-sharing ratio of the partners:
(a) Shiv, Mohan and Hari were partners in a firm sharing profits in the ratio of 5:5:4. Mohan retired and his share was divided equally between Shiv and Hari.
(b) P, Q and R were partners sharing profits in the ratio of 5: 4 : 1. P retires from the firm.
Answer : (a) Old Ratio (Shiv, Mohan and Hari) = 5 : 5 : 4
Mohan’s Profit Share = 5/14
His share is divided between Shiv and Hari equally i.e. in the ratio of 1: 1
Share of Mohan taken by Shiv : 5/14 x ½ = 5/28
Share of Mohan taken by Hari : 5/14 x ½ =5/28
New Profit Share = Old Profit Share + Share taken from Mohan
Shivs new share = 5/14 + 5/28 = 15/28
Hari’s new share = 4/14 + 5/28 = 13/28
∴ New Profit Sharing Ratio (Shiv and Hari) = 15: 13
(b) Old Ratio (P, Q and R) = 5 : 4 : 1
P’s Profit Share = 5/10
Since, no information is given as to how Q and R are acquiring P’s profit share after his retirement, so the new profit sharing ratio between Q and R becomes 4 : 1
∴New Profit Ratio (Q and R) = 4 : 1

Question. Laly, Malu and Neelu are partners sharing profits and losses in the ratio of 4: 3 2. Malu retires and the goodwill is valued at ₹ 72,000. Calculate Malu’s share of goodwill and pass the Journal entry for Goodwill. Laly and Neelu decided to share the future profits and losses in the ratio of 5 : 3.

Working Note:
WN 1 Calculation of Gaining Ratio Old Ratio
(Laly, Malu and Neelu ) = 4 : 3 : 2
Malu retires and New Ratio = 5 : 3
Gaining RatioNew Ratio − Old Ratio
Lalys share : 5/8- 4/9 = 13/72
Neelus share : 3/8-2/9 = 11/72
∴ Gaining Ratio = 13 : 11
WN 2 Adjustment of Goodwill
Goodwill of the firm = Rs 72,000
Malus share of goodwill = 72000 x 3/9= Rs 24000
This share of goodwill is to be debited to remaining Partners’ Capital Accounts in their gaining ratio (i.e. 13 : 11).
Lali’s share = 24000 x13/24 = 13000
Neelu’s share = 24000 x 11/24= 11000

Question. X, Y and Z are partners sharing profits in the ratio of 3 : 2 : 1. Goodwill is appearing in the books at a value of ₹ 60,000. Y retires and at the time of Y’s retirement, goodwill is valued at ₹ 84,000. X and Z decided to share future profits in the ratio of 2: 1. Pass the necessary Journal entries through Goodwill Account.

Working Notes:
WN1: Calculation of Gaining Ratio
X : Y : Z = 3:2:1(Old ratio)X : Z = 2:1(New ratio)Gaining Ratio = New Ratio – Old Ratio
X’s Gain=2/3−3/6=1/6
Z’s Gain = 1/3 -1/6 = 1/6
X : Z = 1:1.

Question. Kumar, Lakshya, Manoj and Naresh are partners sharing profits in the ratio of 3: 2: 1: 4. Kumar retires and his share is acquired by Lakshya and Manoj in the ratio of 3: 2. Calculate new profit-sharing ratio of the remaining partners.
Answer : Kumar’s share =3/10(acquired by Lakshya and Manoj in 3:2)
Share acquired by Lakshya=3/10×3/5=9/50
Share acquired by Manoj=3/10×2/5=6/50
Lakshya’s New Share=2/10+9/50=19/50
Manoj’s New Share=1/10+6/50=11/50
Naresh’s share (as retained)=4/10 or 20/50
New Profit Sharing Ratio=19:11:20

Question. X, Y and Z are partners in a firm sharing profits and losses in the ratio of 3:2:1 Z retires from the firm on 31st March, 2019. On the date of Z’s retirement, the following balances appeared in the books of the firm:
General Reserve ₹ 1,80,000
Profit and Loss Account (Dr.) ₹ 30,000
Workmen Compensation Reserve ₹ 24,000 which was no more required Employees’ Provident Fund ₹ 20,000.
Pass necessary Journal entries for the adjustment of these items on Z’s retirement

WN1: Calculation of Share in Credit Balance of Reserves
Total Credit Balance of Reserves = General Reserve + WCF
= 1,80,000 + 24,000 = 2,04,000
X’s share = 2,04,000 x 3/6 = 102000
Y’s share = 204000 x 2/6 = 68000
Z’ s share = 00 x 1/6 = 34000
N2: Calculation of Share in Debit Balance of Profit and Loss A/c
5. X’s share = 30,000 x 3/6 = 15000
Y’s share = 30000 x 2/6 = 10000
Z’ s share = 204000 x 1/6 = 5000

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

Working Notes:
WN1: Calculation of Manisha’s Share in Goodwill
Manisha’s share=Firm’s Goodwill ×Manisha’s share of profit
Manisha’s share=1,80,000×1/3=60,000
WN2: Calculation of Gaining Ratio
Gaining Ratio = New Ratio − Old Ratio
Aparna’s gain=3/5−3/6=3/30
Sonia’s gain=2/5−1/6=7/30
Gaining Ratio=3:7
Aparna’s share=60,000×3/10=18,000
Sonia’s share=60,000×7/10=42,000

Question. A, B and C were partners sharing profit in the ratio of 3/8 1/ 2 and 1/8. A retires and sur-render’s 2/3 of the share in favour of B and remaining in favour of C .Calculate new ratio and gaining ratio.
Answer : B’s Gain = 2/3 X 3/8 = 6/24 =2/8
C’s Gain = 1/3 X 3/8 = 3/24 = 1/8
NPSR of B = ½ + 2/8 = (4+2)/8 = 6/8
NPSR of C= 1/8+1/8 = 2/8
Gaining ratio = 2/8:1/8 = 2:1
NPSR of B and C = 6/8 :2/8 = 6:2 = 3:1

Question. A,B,C and D are partners in a firm sharing profit in the ratio 3:3:2:2 respectively. D re-tires and A,B and C decided to share future profit in the ratio 3:2:1. Goodwill of the firm is valued at Rs 600000 goodwill already appears in the book at Rs 450,000 the profit for the first year after D’s retirement amount to Rs 1200000 Give necessary journal entries to record and to distribute the profits show your calculation clearly.

Question. A, B and C are partners in a firm sharing profit in the ratio of 2:3 as on 31st March 2022 A retires and B and C decided to share future profits in the ratio 2:1 ,following balances appeared in the book on this date
Profit and loss(Dr) 72000
Emp. Provident fund 1,50,000
Workmen compensation reserve 45000
General reserve 120000
It was agreed that WCR is no more required 25 % of general reserve is to be transferred to provision for doubtful debts .Pass journal entries for the adjustment of these terms on A’s retirement 97

LONG ANSWERS TYPE QUESTIONS :

Question. X, Y and Z were partners in a firm sharing profits in the ratio of 2 : 2 : 1. Their Balance Sheet as at 31st March, 2019 was:

Y retired on 1st April, 2019 on the following terms:
(a) Goodwill of the firm was valued at ₹ 70,000 and was not to appear in the books.
(b) Bad Debts amounted to ₹ 2,000 were to be written off.
(c) Patents were considered as valueless.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of X and Z after Y’s retirement.

Question. X, Y and Z were partners in a firm sharing profits and losses in the 5: 4 : 3. Their
Balance Sheet on 31st March, 2018 was as follows:

X died on 1st October, 2018 and Y and Z decide to share future profits in the ratio of 7 : 5. It was agreed between his executors and the remaining partners that:
(i) Goodwill of the firm be valued at 2 ½ years’ purchase of average of four completed years’ profit which were:

(ii) X’s share of profit from the closure of last accounting year till date of death be calculated on the basis of last years’ profit.
(iii) Building undervalued by ₹ 2,00,000; Machinery overvalued by ₹ 1,50,000 and Furni-ture overvalued by ₹ 46,000.
(iv) A provision of 5% be created on Debtors for Doubtful Debts.
(v) Interest on Capital to be provided at 10% p.a.
(vi) Half of the net amount payable to X’s executor was paid immediately and the balance was transferred to his loan account which was to be paid later.
Prepare Revaluation Account, X’s Capital Account and X’s Executor’s Account as on 1st Oc-tober, 2018.

Working Notes:
WN1: Calculation of Share in General Reserve
Reserve=36,000×5/12=Rs 15,000
Reserve=36,000×5/12=Rs 15,000
WN2: Calculation of Interest on Capital
Interest on capital=3,00,000×10/100×6/12=Rs 15,000
Interest on capital=3,00,000×10/100×6/12=Rs 15,000
WN3: Calculation of Profit & Loss Suspense
Profit & Loss Suspense=1,80,000×5/12×6/12=Rs 37,500
Profit & Loss Suspense=1,80,000×5/12×6/12=Rs 37,500
WN4: Calculation of Share in Goodwill
Gaining Ratio = New Ratio – Old RatioY’s Gain = 7/12−4/12=7/12−4/12=3/12
Z’s Gain = 5/12−3/12=5/12−3/12=2/12
Goodwill=Average Profit ×No. of years’ Purchase
=1,80,000×2.5=Rs 4,50,000
X’s share in Goodwill = 4,50,000×5/12=Rs 1,87,500, should be contributed by Y & Z in gain-ing ratio i.e. 3:2.
Y s share of Goodwill = 187500 x 3/5 = 112500
Z s share of goodwill = 187500 x 2/5 = 75000.

Question. X, Y and Z were partners in a firm sharing profits in the ratio of 2 : 2 : 1. On 31st March, 2018, their Balance Sheet was as follows:

Y died on 30th June, 2018. The Partnership Deed provided for the following on the death of a partner: (i) Goodwill of the business was to be calculated on the basis of 2 times the average profit of the past 5 years. Profits for the years ended 31st March, 2018, 31st March, 2017, 31st March, 2016, 31st March, 2015 and 31st March, 2014 were ₹ 3,20,000 (Loss); ₹ 1,00,000; ₹ 1,60,000; ₹ 2,20,000 and ₹ 4,40,000 respectively.
(ii) Y’s share of profit or loss from 1st April, 2018 till his death was to be calculated on the basis of the profit or loss for the year ended 31st March, 2018. You are required to calculate the following:
(a) Goodwill of the firm and Y’s share of goodwill at the time of his death.
(b) Y’s share in the profit or loss of the firm till the date of his death.
(c) Prepare Y’s Capital Account at the time of his death to be presented to his executors.

Working Notes:
WN1: Calculation of Share in General Reserve
Reserve=60,000×2/5=Rs 24,000
WN2: Calculation of Share in Goodwill
Goodwill=Average Profit×No. of years’ Purchase =1,20,000×2=Rs 2,40,000
Y’s share in Goodwill=2,40,000×25=Rs 96,000, should be contributed by X & Z in 2:1
Average Profit=Total Profits of past years givenNumber of years
=1,00,000+1,60,000+2,20,000+4,40,000−3,20,000 / 5 = Rs 1,20,000
Goodwill=Average Profit ×No. of years’ Purchase
=1,20,000×2=Rs 2,40,000
Y’s share in Goodwill=2,40,000×2/5=Rs 96,000, should be contributed by X & Z in 2:1
Average Profit=Total Profits of past years givenNumber of years
=1,00,000+1,60,000+2,20,000+4,40,000−3,20,000/5 =Rs 1,20,000
WN3: Calculation of Profit & Loss Suspense
Profit & loss Suspense (Loss)=3,20,000×2/5×3/ 12=Rs 32,000

Question. Kanika, Disha and Kabir were partners sharing profits in the ratio of 2 : 1 : 1. On 31st March, 2016, their Balance Sheet was as under:

Kanika retired on 1st April, 2016. For this purpose, the following adjustments were agreed upon:
(a) Goodwill of the firm was valued at 2 years’ purchase of average profits of three com-pleted years preceding the date of retirement. The profits for the year: 2013-14 were ₹ 1,00,000 and for 2014-15 were ₹ 1,30,000.
(b) Fixed Assets were to be increased to ₹ 3,00,000.
(c) Stock was to be valued at 120%.
(d) The amount payable to Kanika was transferred to her Loan Account.
Prepare Revaluation Account, Capital Accounts of the partners and the Balance Sheet of the reconstituted firm.

Working Notes: WN1: Calculation of Goodwill Goodwill=Average Profits×Number of Years’ Purchase
Average Profits = Total Profits /Number of Years
= 1,00,000+1,30,000−20,000/3
= 2,10,000/3 =Rs 70,000
Goodwill=70,000×2=Rs 1,40,000
Kanika’s share=1,40,000×2/4=70,000 (will be shared by old partners in their gaining ratio)
Since no information is given about the share of gain, it is assumed that the old partners are gain-ing in their old profit sharing ratio.
Hence
Disha – 70000 x ½ = 35000
Kabir – 70000 x ½ = 35000

Question. N, S and G were partners in a firm sharing profits and losses in the ratio of 2 : 3: 5. On 31st March, 2016 their Balance Sheet was as under:
G retired on the above date and it was agreed that:

(a) Debtors of ₹ 6,000 will be written off as bad debts and a provision of 5% on debtors for bad and doubtful debts will be maintained.
(b) Patents will be completely written off and stock, machinery and building will be depreci-ated by 5%.
(c) An unrecorded creditor of ₹ 30,000 will be taken into account.
(d) N and S will share the future profits in 2 : 3 ratio.
(e) Goodwill of the firm on G’s retirement was valued at ₹ 90,000.
Pass necessary Journal entries for the above transactions in the books of the firm on G’s re-tirement.

Working Notes:
WN1: Calculation of G’s Share of Goodwill
G’s share=Firm’s Goodwill×G’s Profit Share
G’s share=90,000×5/10=45,000 (to be borne by gaining partners in gaining ratio)
G’s share=Firm’s Goodwill×G’s Profit Share
G’s share=90,000×5/10=45,000 (to be borne by gaining partners in gaining ratio)
WN2: Calculation of Gaining Ratio
Gaining Ratio = New Ratio − Old Ratio
N’s gain=2/5−2/10=2/10
S’s gain=3/5−3/10=3/10
Gaining Ratio=2:3
N’s share=45,000×2/5=18,000
S’s share=45,000×3/5=27,000
WN2: Calculation of Excess/Deficit Provision for Doubtful Debts
Required Provision (@5%)=(1,35,000−6,000)×5/100=6,450
Existing Provision (after writing bad−debts)= 9,000
Excess Provision (to be written back)=2,550 (9,000−6,450)
WN3: Calculation of G’s Loan Balance
Amount due to G = Opening Capital + Credits – Debits
= 4,50,000 + (45,000 + 45,000) – (37,500 + 81,225)
= Rs 4,21,275

Question. Khushboo, Leela and Meena were partners in a firm sharing profits in the ratio of 5:3:2. Their Balance Sheet on March 31,2015 was as follows:
Balance Sheet of Khushboo, Leela and Meena
As at March 31, 2015

On April 1,2015 Leela retired on the following terms:
i. Building was to be depreciated by 10,000.
ii. A Provision of 5% was to be made on Debtors for doubtful debts.
iii. Salary outstanding was 4,800
iv. Goodwill of the firm was valued at1,40,000.
v. Leela was to be paid 20,800 through cheque and the balance was to be paid in two equal quarterly instalments (starting from June 30,2015) along with interest @ 10% p.a.
Prepare Revaluation Account, Leela’s Capital Account and her Loan Account till it is finally paid.

Question. B G and M are partners in a firm sharing profit and losses in the ratio of 4:5:6 on 31st March 2014 G retired. On that date the capital of B G and M before the necessary adjustments stood at Rs 200000, Rs 100000 and Rs 50000 respectively. On G’s retirement goodwill of the firm was valued at Rs 114000. Revaluation of assets and reassessment of liabilities resulted in a profit of Rs 6000 general reserve which stood in the book of the firm at Rs 30000.
The amount payable to G was transferred to his loan account. B and M agreed to pay G , 2 yearly instalments of Rs 75000 each including interest at the rate 10% p.a on the outstanding balance during the first two years and the balance including interest in the third year the firm closes its book on 31st March every year.
Prepare G’s loan account till it is finally paid showing the working notes clearly.

Question. S Y and Z were partners in a firm sharing profits and losses in the ratio of 4:3:3. On 31st March 2016, their balance sheet was as follows:

On the above date, S retired and it was agreed that
a) Debtors of Rs 4000 will be written off as bad debts and a provision of 5% on debtors for bad and doubtful debts will be maintained
b) An unrecorded creditor of Rs 20000 will be recorded
c) Patents will be completely written off and 5% depreciation will be charged on stock, machinery and building
d) Y and Z will share future profits in the ratio 3:2
e) Goodwill of the firm on S’s retirement was valued at Rs 540000
Pass necessary journal entries for the above transaction in the book of firm on S ‘s retirement.