question_answer

X, Y and Z are partners sharing profits and losses in the ratio of 2 : 2 : 1. Y retires from the firm on 31st March, 2017. On the date of Y's retirement, the following balances appeared in the books of the firm.

Advertisement suspense account	Rs. 25,000
Contingency reserve	Rs. 15,000
Workmen's compensation reserve	Rs. 20,000
Loss in business account	Rs. 15,000

Pass the necessary journal entries for the adjustment of these items on Y's retirement Write the values which can be associated with the partners in this case.

Answer:

JOURNAL

Date	Particulars		LF	Amt (Dr)	Amt (Cr)
2017
Mar 31	Contingency Reserve A/c	Dr		15,000
	Workmen?s Compensation Reserve A/c	Dr		20,000
	To X?s Capital A/c				14,000
	To Y?s Capital A/c				14,000
	To Z?s Capital A/c				7,000
	(Being the contingency reserve and workmen?s compensation reserve transferred to capital accounts on  Y?s retirement)
Mar 31	X?s Capital A/c	Dr		16.000
	Y?s Capital A/c	Dr		16,000
	Z?s Capital A/c	Dr		8,000
	To Advertisement Suspense A/c				25,000
	To Loss in Business A/c				15,000
	(Being the amount of advertisement suspense account and loss in business account transferred to capital accounts on Y?s retirement)

Values associated with the partners are: (i) Preparing for Future Partners have prepared for future by creating reserves. (ii) Honesty and Transparency Continuing partners have shown honesty and transparency by sharing accumulated profits and losses with the outgoing partner.