A , B and C are partners in a firm sharing profits in the proportion of 3 : 2 : 1 . Their Balance Sheet as at 31st March, 2018 stood as follows :

Liabilities

₹

Assets

₹

Sundry Creditors

2,60,000

Cash in Hand

42,500

General Reserve

1,20,000

Cash at Bank

2,14,500

Capital A/cs:
Debtors 1,63,000

A
2,00,000
Stock 17,500

B 1,20,000 Investments 1,32,500

C
80,000

4,00,000
Building 2,10,000

7,80,000

7,80,000

B died on 30th June , 2018 and according to the deed of the said partnership his executors are entitled to be paid as under:
(a) The capital to his credit at the time of his death and interest thereon @ 10% per annum.
(b) His proportionate share of General Reserve.
(c) His share of profits fro the intervening period will be based on the sales during that period. Sales from 1st April, 2018 to 30th June , 2018 were as ₹ 12,00,000. The rate of profit during past three years had been 10% on sales.
(d) Goodwill according to his share of profit to be calculated by taking twice the amount of profits of the last three years less 20% . The profit of the previous three years were: 1st Year: ₹ 82,000; 2nd year: ₹ 90,000; 3rd year ₹ 98,000.
(e) The investments were sold at par and his executors were paid out in full.
Prepare B's Capital Account and his Executors' Account.

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Solution

B’s Capital Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

B’s Executor A/c

3,47,000

Balance b/d

1,20,000

Interest on Capital A/c

3,000

General Reserve

40,000

Profit & Loss Suspense A/c

40,000

Goodwill A/c

1,44,000

3,47,000

3,47,000

B’s Executor Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Bank A/c

3,47,000

B’s Capital A/c

3,47,000

3,47,000

3,47,000

Working Notes:

WN 1: Calculation of Interest on Capital

WN 2: Calculation of Profit Share up-to-death

WN 3: Calculation of share of goodwill

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Similar questions

Arti, Bharti and Seema are partners sharing profits in the proportion of 3:2:1 and their Balance Sheet as on March 31, 2016 stood as follows:

Books of Arti, Bharti and Seema Balance Sheet as on March 31, 2016
Liabilities		Amount Rs	Assets	Amount Rs
Bills Payable		12,000	Buildings	21,000
Creditors		14,000	Cash in Hand	12,000
General Reserve		12,000	Bank	13,700
Capitals:			Debtors	12,000
Arti 20,000			Bills Receivable	4,300
Bharti	12,000		Stock	1,750
Seema	8,000	40,000	Investment	13,250
		78,000		78,000

Bharti died on June 12, 2016 and according to the deed of the said partnership, her executors are entitled to be paid as under:

(a) The capital to her credit at the time of her death and interest thereon @ 10% per annum.

(b) Her proportionate share of reserve fund.

(c) Her share of profits for the intervening period will be based on the sales during that period, which were calculated as Rs 1,00,000. The rate of profit during past three years had been 10% on sales.

(d) Goodwill according to her share of profit to be calculated by taking twice the amount of the average profit of the last three years less 20%. The profits of the previous years were:

2013 – Rs 8,200

2014 – Rs 9,000

2015 – Rs 9,800

The investments were sold for Rs 16,200 and her executors were paid out. Pass the necessary journal entries and write the account of the executors of Bharti.

Arti, Bharti and Seema are partners sharing profits in the proportion of 3 :2 :1 and their Balance Sheet as on March 31, 2003 stood as follows.

$Balance Sheet$
$as on March 31,2003$
$\begin{matrix} Capital and Liabilities & Amt. (Rs) & Assets & Amt. (Rs) Bills Payable & 12, 000 & Building & 21, 000 Creditors & 14, 000 & Cash in hand & 12, 000 Ganeral Reserve & 12, 000 & Bank & 13, 700 Capital & Debtors & 12, 000 Arti 20, 000 & Bills Receivable & 4, 300 Bharti 12, 000 & Stock & 1, 750 Seema 8, 000 - ---- - & 40, 000 & Investment & 13, 250 ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 78, 000 - ------ - - ------ - & ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 78, 000 - ------ - - ------ - \end{matrix}$

Bharti died on June 12, 2003 and according to the deed of the said partnership, her executors are entitled to be paid as under

(a) The capital to her credit at the time of her death and interest there on @ 10% per annum.

(b) Her proportionate share of reserve fund.

(c) Her share of profits for the intervening period will be based on the sales during that period, which were calculated as Rs. 1,00,000. The rate of profit during past three years had been 10% on sales.

(d) Goodwill according to her share of profit to be calculated by taking twice the amount of the avera ge profit of the last three years less 20%. The prof its of the previous years were

2001 - Rs. 8,200

2002 - Rs. 9,000

2003 - Rs. 9,800

The investments were sold for Rs.16,200 and her executors were paid out. Pass the necessary journal entries and write the account of the executors of Bharti.

Q. X, Y and Z were partners in a firm sharing profits in the ratio of 2 : 2 : 1. On 31st March, 2018, their Balance Sheet was as follows:

Liabilities		Amount (₹)	Assets	Amount (₹)
Trade Creditors		1,20,000	Cash at Bank	1,80,000
Bills Payable		80,000	Stock	1,40,000
General Reserve		60,000	Sundry Debtors	80,000
Capital A/cs:			Building	3,00,000
X	7,00,000		Advance to Y	7,00,000
Y	7,00,000		Profit and Loss A/c	3,20,000
Z	60,000	14,60,000
		17,20,000		17,20,000

Y died on 30th June, 2018. The Partnership Deed provided for the following on the death of a partner:
(i) Goodwill of the business was to be calculated on the basis of 2 times the average profit of the past 5 years. Profits for the years ended 31st March, 2018, 31st March, 2017, 31st March, 2016, 31st March, 2015 and 31st March, 2014 were ₹ 3,20,000 (Loss); ₹ 1,00,000; ₹ 1,60,000; ₹ 2,20,000 and ₹ 4,40,000 respectively.
(ii) Y's share of profit or loss from 1st April, 2018 till his death was to be calculated on the basis of the profit or loss for the year ended 31st March, 2018.
You are required to calculate the following:
(a) Goodwill of the firm and Y's share of goodwill at the time of his death.
(b) Y's share in the profit or loss of the firm till the date of his death.
(c) Prepare Y's Capital Account at the time of his death to be presented to his executors.

Priya, Karam and Anna were partners of a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance Sheet on 31st March, 2014 was as follows :

$\begin{matrix} Capital and Liabilities & Rs & Assets & (Rs) Bills Payable & 1, 20, 000 & Cash in Hand & 20, 000 Creditors & 1, 40, 000 & Debtors & 1, 40, 000 Karam's Loan at 5 % & 1, 00, 000 & Bills Receivable & 70, 000 Reserve & 1, 80, 000 & Stock & 1, 70, 000 Capital A/cs : & Priya 2, 00, 000 & Investment & 1, 30, 000 Karam 1, 20, 000 & Advertisement Suspense A/c & 1, 20, 000 Anna 80, 000 - ------ - & 4, 00, 000 - -------- - & Building & 2, 90, 000 9, 40, 000 - -------- - - -------- - & ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 9, 40, 000 - -------- - - -------- - \end{matrix}$

Karam died on 12th June, 2014 and according to the Partnership Deed his executors were entitled to be paid as under :

(a) His share in the profits of the firm till the date of his death which will be calculated on the basis of average profits of last three completed years.

(b) His share in the goodwill of the firm which will be calculated on the basis of two years' purchase of total profits of last three years.

Prepare Karam's Capital A/c to be rendered to his executors.

Q. Akhil, Nikhil and Sunil were partners sharing profits and losses equally. Following was their Balance Sheet as at 31st March, 2018:

Liabilities		₹	Assets	₹
Trade Creditors		40,000	Building	2,00,000
General Reserve		45,000	Plant and Machinery	80,000
Capital A/cs:			Stock	35,000
Akhil	1,95,000		Debtors	80,000
Nikhil	1,20,000		Cash at Bank	85,000
Sunil	80,000	3,95,000
		4,80,000		4,80,000

Sunil died on 1st August, 2018. The Partnership Deed provided that the executor of a deceased partner was entitled to:
(a) Balance of Partners' Capital Account and his share of accumulated reserve.
(b) Share of profits from the closure of the last accounting year till the date of death on the basis of the profit of the preceding completed year before death.
(c) Share of goodwill calculated on the basis of three times the average profit of the last four years.
(d) Interest on deceased partner's capital @ 6% p.a.
(e) ₹ 50,000 to be paid to deceased's executor immediately and the balance to remain in his Loan Account.
Profits and Losses for the preceding years were: 2014-15 − ₹ 80,000 Profit; 2015-16 − ₹ 1,00,000 Loss; 2016-17 − ₹ 1,20,000 Profit; 2017-18 − ₹ 1,80,000 Profit.
Pass necessary Journal entries and prepare Sunil's Capital Account and Sunil's Executor Account.

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B’s Executor Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Bank A/c	3,47,000	B’s Capital A/c	3,47,000
	3,47,000		3,47,000

Liabilities		₹	Assets	₹
Sundry Creditors		2,60,000	Cash in Hand	42,500
General Reserve		1,20,000	Cash at Bank	2,14,500
Capital A/cs:			Debtors	1,63,000
A	2,00,000		Stock	17,500
B	1,20,000		Investments	1,32,500
C	80,000	4,00,000	Building	2,10,000
		7,80,000		7,80,000

B’s Capital Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
B’s Executor A/c	3,47,000	Balance b/d	1,20,000
		Interest on Capital A/c	3,000
		General Reserve	40,000
		Profit & Loss Suspense A/c	40,000
		Goodwill A/c	1,44,000
	3,47,000		3,47,000