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Question

Sunny, Honey and Rupesh were partners in a firm. On 31st March, 2014, their Balance Sheet was as follows:

Liabilities

Assets

Creditors

10,000

Plant and Machinery

40,000

General Reserve

30,000

Furniture

15,000

Capital A/cs:

Investments 20,000
Sunny

30,000

Debtors 20,000
Honey 30,000 Stock 20,000
Rupesh

20,000

80,000

25,000

1,20,000

1,20,000


Honey died on 31st December, 2014. The Partnership Deed provided that the representatives of the deceased partner shall be entitled to:
(a) Balance in the Capital Account of the deceased partner.
(b) Interest on Capital @ 6% per annum up to the date of his death.
(c) His share in the undistributed profits or losses as per the Balance Sheet.
(d) His share in the profits of the firm till the date of his death, calculated on the basis of rate of net profit on sales of the previous year. The rate of net profit on sales of previous year was 20%. Sales of the firm during the year till 31st December, 2014 was ₹ 6,00,000.
Prepare Honey's Capital Account to be presented to his executors.

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Solution

Honey’s Capital A/c

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Executor’s A/c

81,350

Balance b/d

30,000

Interest on Capital

1,350

Profit and Loss Suspense A/c

40,000

General Reserve

10,000

81,350

81,350

Working Notes:

WN1 Calculation of Interest on Honey’s Capital

WN2 Calculation of Honey’s share in profits

WN3 Calculation of Honey’s Share in General Reserve


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