Question

A, B and C are equal partners of a trading firm. The capital of the firm on 1st April, 2024 is ₹ 6,00,000 held equally by the partners.

Under the Partnership Deed:

1. A and B were entitled to be credited at the close of each year with partnership salaries of ₹ 1,000 p.m. and ₹ 1,500 p.m. respectively.
2. In the event of death of a partner, Goodwill is to be valued at one year’s purchase of average profit of the three years preceding the death.
3. Partners were to be charged 6% p.a. interest on their drawings and were to be allowed 6% p.a. interest on their capitals.

B died on 30th June, 2024. His drawings from 1st April to 30th June 2024 amounted to ₹ 10,000 p.m. drawn at the beginning of each month.

The profits of the three years ending 31st March each year were; 2022 - Profit ₹ 1,20,000; 2023 - Loss ₹ 40,000; 2024 -Profit ₹ 1,90,000.

Profit of the firm from 1st April to 30th June, 2024 amounted to ₹ 30,000 before providing for salaries and interest.

Prepare B’s Current and Capital Accounts as they would appear in the books of the firm.

Answer 1

Dr.	B’s Current A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Drawings	30,000	By Interest on Capital	3,000
To Interest on Drawings	300	By Partner’s Salary	4,500
To Balance c/d	18,200	By P & L Suspense (Share of profit to death)	4,600
	48,500		48,500

 

Dr.	B’s Capital A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To B’s Current A/c	18,200	By Balance b/d	2,00,000
To B’s Executor’s A/c	2,11,800	By A’s Capital (Goodwill)	15,000
		By C’s Capital (Goodwill)	15,000
	2,30,000		2,30,000