Entry in case of retiring partner

This query is : Resolved

CA YOGESH GARG GMG PLYWOODS (Querist)
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17 January 2013 If there were 5 partners in a firm(XYZ) say A,B,C,D,E. The assets & liabilities of the firm before retirement was as follow:-

Asset side: land of rs. 1 Crore

Liab. side: all partners have capital of rs. 20 Lakh each i.e. total rs. 1Crore.

there were NO CASH & BANK BALANCE with the firm.

Now A,B,C wants to retire. In consideration they will receive portion of land amounting to rs. 20 lakh each
i.e. land of rs. 60 lakh will be t/f to retiring partners & which amounts to capital gain to the firm e.g. cap. gain is rs. 6 lacks.
all the partners have a settlement that cap gain will be bear by retiring partners i.e. A,B & C will have to pay Rs. 2 lacks each to the firm.

Now my question is how we can make the entries in books of accounts of firm so that no tax liab exists for firm and the balance of retiring partners i.e. A,B & C will also be nil (Capital A/c as well as Loan A/c).

CA YOGESH GARG GMG PLYWOODS

CA YOGESH GARG GMG PLYWOODS (Querist)
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31 January 2013 1. When A,B,C will bring cash of rs. 2lac each
cash Dr. 6lacs, A,B,C Cr. 6lacs

2. when c/g is paid by firm
Tax Dr. 6Lacs, Cash Cr. 6Lacs

3. when tax is charged to A,B,C capital a/c
A,B,C Dr. 6lacs, Tax paid Cr. 6Lakhs

4. final payment to retiring partners
A,B,C Dr. 60Lacs, Land Cr. 60Lacs

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