A, B and C were carrying on business in partnership, sharing profits and losses in the ratio of 2 : 1 : 1. On December 31, 2014 B decided to retire from the firm and the following terms were agreed upon :

(a) A typewriter purchased on January 1, 2013 for Rs 1,200 was charged to the Office Expenses Account in 2014 and has to be brought into account after allowing 15% p.a. depreciation on the reducing balance basis.

(b) Furniture and fittings are to be written-down by Rs 603 and stock by Rs 5,000.

(c) The provision for bad and doubtful debts standing in the books at Rs 4,000 are to be reduced by 25%.

(d) A liability in respect of workmen’s compensation for Rs 2,100 not acknowledged by the partnership as a valid claim, is however, to be provided for.

(e) Goodwill of the firm is valued at Rs 24,000.

(f) The capital accounts of the partners on December 31, 2014 stood at A ---- Rs 20,001, B ---- Rs 15,001 and C ---- Rs 10,001.

A and C agree that the Goodwill is to be adjusted through Capital Accounts of the partners and the amount payable to B shall be brought in by them in their new profit-sharing ratio.

You are required to pass Journal Entries to record the above transactions.

Answer rating: 100% (QA)

DEBIT AMOUNT IN RS CREDIT AMOUNT IN RS Typewriter account Dr 1200 To Profit Loss Adjustment account 1200 Being value of typewriter which was expensed out in 2013 now reversed as Asset of the partnersh... View the full answer