Question

X,Y and Z were partners sharing profits and losses in the ratio of 3:2:1. They had capitals of Rs. 40000, 30000, and 20000 respectively. Z retires from the firm. On the date of retirement general reserve stood at 20000 and profit and loss account (Dr) balances at Rs. 5000. The revaluation profit is 18000. Ascertain the amount to be transferred to Z’s loan account on his retirement.

Answer 1

When Z retires from the firm, the amount to be transferred to Z's loan account can be calculated by subtracting Z's share of the remaining capital from Z's capital.

Step-by-step explanation:

When Z retires from the firm, the amount to be transferred to Z's loan account can be calculated using the following steps:

1. Calculate the total initial capital of X, Y, and Z: 40,000 + 30,000 + 20,000 = 90,000.
2. Calculate the total profit and loss account balances: 5,000 + 18,000 = 23,000.
3. Calculate the total general reserve: 20,000.
4. Calculate the total remaining capital: 90,000 + 23,000 + 20,000 = 133,000.
5. Calculate Z's share of the remaining capital based on the profit and loss sharing ratio (1/6): (1/6) * 133,000 = 22,166.67.
6. Finally, subtract Z's share of the remaining capital from Z's capital to find the amount to be transferred to Z's loan account: 20,000 - 22,166.67 = -2,166.67 (Z owes this amount to the firm).