Question

Naval, Nyaya and Nritya were partners sharing profits in the ratio of 3:5:2. On 31st March, 2024, Nyaya retired. Revaluation of assets and goodwill adjustments were made. Prepare Revaluation Account and Partners’ Capital Accounts.

Hint:

On a partner’s retirement, always adjust goodwill through gaining partners’ capital accounts, and update Revaluation Account for asset-liability changes before final settlement.

Answer 1

Revaluation Account

Dr. Revaluation A/c	₹	Cr. Particulars	₹
To Plant & Machinery A/c	20,000	By Land & Building A/c	50,000
To Provision for D/D A/c	5,000	By Investments A/c	65,000
	25,000		1,15,000
Net Gain transferred to:
To Capital A/c:
Naval	27,000
Nyaya	45,000
Nritya	18,000
	90,000
	1,15,000		1,15,000

Partners’ Capital Accounts

Dr. Particulars	Naval	Nyaya	Nritya	Cr. Particulars	Naval	Nyaya	Nritya
To Nyaya's Loan		4,95,000		By Bal. b/d	2,00,000	3,00,000	5,00,000
To Balance c/d	4,19,000		5,91,000	By Gen. Res.	24,000	40,000	16,000
				By Reval. A/c	27,000	45,000	18,000
				By Naval (GW)		72,000
				By Nritya (GW)		48,000
(GW Adjustment)
Naval A/c	72,000
Nritya A/c			48,000
	6,19,000	5,67,000	6,59,000		6,19,000	5,67,000	6,59,000

Working Notes:

• Goodwill of firm = ₹1,20,000 ⇒ Nyaya’s share = 5/10 × 1,20,000 = ₹60,000
• Gaining Ratio (New Ratio assumed 3:2)
  Naval's gain: 3/5 - 3/10 = 3/10
  Nritya's gain: 2/5 - 2/10 = 2/10
  Gaining Ratio = 3:2
• So Naval compensates ₹36,000 and Nritya ₹24,000 to Nyaya for goodwill (but doubled due to full goodwill value). Hence:
  Naval = ₹72,000, Nritya = ₹48,000.