Joshi, Pandey and Agarwal were partners in a firm sharing profits in the ratio of $2 : 2 : 1$ . On $31.3.2014$ , their Balance Sheet was as follows :
On $31.12.2014$ , Agarwal died. The partnership deed provided for the following to the executors of the deceased partner :
(a) His share in the goodwill of the firm, calculated on the basis of three year's purchase of the average profits of the last four years.The profits of the last four years were $R s 2, 70, 000$ ; $R s 3, 00, 000$ ; $R s 5, 40, 000$ and $R s 8, 10, 000$ respectively.
(b) His share in the profits of the firm till the date of his death, calculated on the basis of the average profits of the last four years. (c) Interest $@ 12 %$ per annum on the credit balance, if any, in his Capital account.
(d) Interest on his loan $@ 12 %$ per annum.
Prepare Agarwal's Capital Account to be presented to his executors.

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Solution

Working Notes:
WN1 : Calculation of Interest on Agarwal's Loan
Interest on Loan = $84, 000 \times \frac{12}{100} \times \frac{9}{12} = R s 7, 560$
WN2 : Calculation of Agarwal's share in profits
Average Profit = $\frac{2, 70, 000 + 3, 00, 000 + 5, 40, 000 + 8, 10, 000}{4} = R s 4, 80, 000$
Share of Agarwal in profits = $4, 80, 000 \times \frac{1}{5} \times \frac{9}{12} = R s 72, 000$
WN3 Adjustment of Goodwill
Average Profit = $R s 4, 80, 000$
Goodwill of the firm = $A v e r a g e P r o f i t \times N u m b e r o f y e a r^{'} s p u r c h a s e$
= $4, 80, 000 \times 3 = R s 14, 40, 000$
Agarwal's Share of Goodwill = $14, 40, 000 \times \frac{1}{5} = R s 2, 88, 000$
Joshi will pay = $2, 88, 000 \times \frac{1}{2} = R s 1, 44, 000$
Pandey will pay = $2, 88, 000 \times \frac{1}{2} = R s 1, 44, 000$
Note : Since, here no imformation is given regarding the share acquired by Joshi and Pandy, therefore, their gaining ratio is same as their new profit sharing ratio i.e. $2 : 2$ or $1 : 1$ .

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