Geeta, Sita and Meeta were partners in a firm sharing profits in the ratio of $5 : 3 : 2$ . The firm closes its books on $31^{s t}$ March every year. On $30 - 6 - 2015$ Geeta died. On that date her capital account showed a debit balance of Rs. $5, 000$ and Goodwill of the firm was valued at Rs. $3, 70, 000$ .
There was a debit balance of Rs. $12, 000$ in the profit and loss account. Geeta's share of profit in the year of her death was to be calculated on the basis of the average profit of last $5$ years which was Rs. $80, 000$ .
Pass necessary journal entries in the books of the firm on Geeta's death.

Open in App

Solution

Working Notes:
WN 1: Calculation of Geeta's share of Goodwill
Geeta's Share of Goodwill $=$ Firm's Goodwill $\times$ Her Profit Share
$3, 70, 000 \times \frac{5}{10} = R s .1, 85, 000$
$R s .1, 85, 000$ will be borne by gaining partners in gaining ratio.
Since, nothing is specified, it is assumed that continuing partners gain in their old profit sharing ratio of $3 : 2$ .
Sita's gain $= 1, 85, 000 \times \frac{3}{5} = R s .1, 11, 000$
Meeta's gain $= 1, 85, 000 \times \frac{2}{5} = R s 74, 000$
WN2: Calculation of share of Debit balance in P%L A/c
Geeta's share $= 12, 000 \frac{5}{10} R s .6, 000$
Sita's share $= 12, 000 \times \frac{3}{10} = R s .3, 600$
Meeta's share $= 12, 000 \times \frac{2}{10} = R s 2, 400$
WN3: calculation of Share in profit (earned during the year).
Geeta's share $=$ Average Profits $\times$ Number of Months Geeta Remained $\times$ Her Profit Share
$= 80, 000 \times \frac{3}{12} \times \frac{5}{10} = R s .10, 000$
WN4: Calculation of Amount transferred to Geeta's Executor's A/C
Amount due to Geeta $=$ Capital $+$ Credit Items - Debit Items
$= (5, 000) + 1, 85, 000 - 6, 000 + 10, 000 = R s 1, 84, 000$ .

Suggest Corrections

Similar questions

A, B and C were partners in a firm sharing profits in 3 : 2 : 1 ratio. The firm closes its books on 31st March every year. B died on 12-6-2007. On B's death the goodwill of the firm was valued at Rs 60,000. On B's death his share in the profits of the firm till the time of his death was to be calculated on the basis of previous year's profit which was Rs 1,50,000. Calculate B's share in the profit of the firm. Pass necessary journal entries for the treatment of goodwill and B's share of profit at the time of his death.

Q. X, Y and Z were partners in a firm sharing profit in 3 : 2 : 1. The firm closes its books on 31st March every year. Y died on 30th June, 2018. On Y's death goodwill of the firm was valued at ₹ 60,000. Y's share in the profit of the firm till the date of his death was to be calculated on the basis of previous year's profit which was ₹ 1,50,000.
Pass necessary Journal entries for goodwill and Y's share of profit at the time of his death.

Q. A, B and C were partners sharing profits in the ratio of 3 : 2 : 1. The firm closes its books on 31st March every year. B died on 30th June, 2018. On his death, Goodwill of the firm was valued at ₹ 6,00,000. B's share in profit or loss till the date of death was to be calculated on the basis of previous year's profit which was ₹ 15,00,000 (Loss). Pass necessary Journal entries for goodwill and his share of loss.

PRACTICAL PROBLEM

Minaxi, Ramesh and Poonam were partners sharing profits and losses in the proportion to their capitals, Their Balance sheet of the firm on 31^st March, 2012 was as under:

Balance Sheet as on 31^st March, 2012
Liabilities	Amount Rs	Assets		Amount Rs
Capital		Land and Building		40,000
Minaxi	30,000	Investment		20,000
Ramesh	20,000	Debtors	16,000
Poonam	10,000	Less: R.D.D.	2,000	14,000
Creditors	28,000	Stock		18,000
Reserve	18,000	Cash		14,000
	1,06,000			1,06,000

Poonam died on 1^stAugust, 2012 and the following adjustments were made

1) Assets revalued as under-Land & Building Rs 44,000, Investment Rs 18,000, Stock Rs 17,000.

2) All debtors were good.

3) Goodwill of the firm valued at two times the average profits of the last 4 years. No goodwill account to be shown in the books of the firm.

4) Poonam’s share of profit upto her death to be calculated on the basis of average profits of last two year.

5) Profits were Rs 6,000, Rs 12,000, Rs 7,000, Rs 11,000

Prepare:

1) Profits and loss adjustment A/c

2) Balance sheet as on 1^stAugust 2012

Aditi, Kavya and Sohail were partners in a firm sharing profits in the ratio of 2 : 2 : 1. The firm closes its books on 31st March every year. On 30th September, 2017 Sohail died. According to the partnership deed, his legal representatives are entitled to the following :

(a) Capital as per Balance Sheet (Rs 60,000)

(b) Interest on capital @ 6 $%$ p.a., till the date of death.

(d) Share of goodwill to be determined on the basis of the three years purchase of the average profits of last four years. The profits of last four years were : Rs 30,000, Rs 50,000, Rs 40,000 and Rs 60,000

Join BYJU'S Learning Program