60 :- Amit, Bunty and Charan are partners sharing profits and losses in the ratio of 2:2:1. Charan retired on 30th June 2025. The balance sheet of the firm on 31st March 2025 was as follows :-
It was agreed that amount payable to Charan will be determined by Making following adjustments :
(a) Building be valued at Rs 12,00,000
(b) Investment be valued at Rs 1,00,000
(c) Stock to be valued at Rs 3,00,000
(d) Goodwill of the firm be valued at 2 years purchase of average profit of the preceeding three years.
Profits of the preceding five years were as under :
Prepare (i) revaluation account (ii) Partners capital accounts and (iii) Balance sheet after Charan’s retirement.
Solution :-
WORKING NOTES
(a) Calculation of goodwill of the firm
Average profit of last five years = (2,00,000 + 2,35,000 + 3,00,000 + 2,75,000 + 3,25,000)/5
= 13,35,000/5
= Rs 2,67,000
Goodwill of the firm = average profit of last 5 years x 2 years of Purchased
= 2,67,000 x 2
= Rs 5,34,000
Chetan’s share on goodwill = 5,34,000 x 1/5
= Rs 1,06,800
Chetan will be compensated by Amit and Bunty in 1:1
Amit will contribute = 1,06,800 x 1/2 = Rs 53,400
Bunty will contribute = 1,06,800 x 1/2 = Rs 53,400
(b) Calculation of Chetan’s share in profit
Average profit of last 3 years = 3,00,000 + 2,75,000 + 3,25,000/3
= 9,00,000/3
= 3,00,000
Chetan’s share in profit = 3,00,000 x 3/12 x 1/5
= Rs 15,000