Question

Pranav, Karan and Rahim were partners in a firm sharing profits and losses in the ratio of 2:2:1. On 31st March, 2017, their Balance Sheet was as follows :

BALANCE SHEET OF PRANAV, KARAN AND RAHIM
as on 31st March, 2017
$\begin{array}{cccc}\text{Liabilities}& \text{Amount}& \text{Assets}& \text{Amount}\\ & \text{(Rs)}& & \text{(Rs)}\\ \text{Creditors}& 3,00,000& \text{Fixed Assets}& 4,50,000\\ \text{General Reserve}& 1,50,000& \text{Sotck}& 1,50,000\\ \text{Capitals :}& & \text{Debtors}& 2,00,000\\ \text{Pranav}& 2,00,000& \text{Bank}& 1,50,000\\ \text{Karan}& 2,00,000& & \\ \text{Rahim}& 1,00,000& & \\ \text{Total}& 9,50,000& \text{Total}& 9,50,000\end{array}$

Karan died on 12-6-2017. Accoring to the partnership deed, the legal representatives of the deceased partner were entitled to the following:

(i) Balance in his Capital Account.

(ii) Interest on his Capital @ 12% p.a.

(iii) Share of goodwill. Goodwill of the firm on Karan's death was valued at Rs 60,000.

(iv) Share in the profits of the firm till the date of his death, calculated on the basis of last year's profit. The profit of the firm for the year ended 31-3-2017 was Rs 5,00,000.

Prepare Karan's Capital Account to be presented to his representatives.

Answer 1

Dr. KARAN'S CAPITAL ACCOUNT Cr.
$\begin{array}{cccc}\text{Particulars}& \text{Amount}& \text{Particulars}& \text{Amount}\\ & \text{(Rs)}& & \text{(Rs)}\\ \text{To Karan's Executor's}& & \text{By Balance b/d}& 2,00,000\\ \text{A/c}& 3,28,000& \text{By Interest on Capital A/c}(2,00,000\times \frac{12}{100}\times \frac{73}{365})& 4,800\\ & & \text{By General Reserve A/c}(1,50,000\times \frac{2}{5})& 60,000\\ & & \text{By Profit and Loss Suspense A/c}(5,00,000\times \frac{2}{5}\times \frac{73}{365})& 40,000\\ & & \text{By Pranav's Capital A/c (Goodwill)}(60,000\times \frac{2}{5}\times \frac{2}{3})& 16,000\\ & & \text{By Rahim's Capital A/c (Goodwill)}(60,000\times \frac{2}{5}\times \frac{1}{3})& 8,000\\ \text{Total}& 3,28,000& \text{Total}& 3,28,000\end{array}$