Question

A, B and C used to work in a call centre on the night shift, where they became friends. After completing their graduations through correspondence, they decided to quit their jobs and start their own business. They opened a Readers’ Café in a famous mall. They were earning well. On 30th June, 2025, fire broke out in the kitchen of Café and B met with an accident and lost his life. Their previous year’s Balance sheet of the firm as at 31st March, 2025 is as follows:

BALANCE SHEET as at 31st March, 2025
Liabilities	₹	₹	Assets	₹
Capital A/cs:		6,00,000	Cooking Utensils	1,20,000
A	2,00,000		Ovens	40,000
B	2,00,000		Books	1,60,000
C	2,00,000		Motor Bikes	2,10,000
Workmen’s Compensation Reserve		1,20,000	Furniture & Fixtures	1,80,000
Sundry Creditors		1,02,500	Sundry Debtors	60,000
Bills payable		30,000	Inventories	25,000
Outstanding Expenses		17,500	Bank	33,000
			Profit & Loss Account (Loss for the Y/E 31st March, 2025)	42,000
		8,70,000		8,70,000

According to the Partnership Deed, in addition to the Deceased Partner’s Capital, the executors are entitled to the following:

(i) Goodwill is to be valued at 3 years’ purchase of the average profit of the last five years ended 31st March, which were:

2021 = ₹ 50,000,

2022 = ₹ 40,000

2023 = ₹ 80,000

2024 = ₹ 90,000

(ii) B’s share of goodwill be adjusted against the capital accounts of continuing partners A and C, who have decided to share future profits in the ratio of 5 : 3.

(iii) Cooking Utensils were found undervalued by 20%; Ovens were revalued at 90% and Inventories at ₹ 35,000.

(iv) A liability on account of workmen’s compensation is determined at 1,08,000.

(v) B’s share of profit or loss up to the date of death on the basis of average profits of the last two years.

Based on the above information, answer the following questions:

A. Gaining the ratio of A and C would be ______.

1. 1 : 1
2. 5 : 3
3. 7 : 1
4. 3 : 2

B. B’s share in gain (profit)/loss on revaluation of assets and reassessment of liabilities would be ______.

1. ₹ 36,000 (Gain).
2. ₹ 30,000 (Gain).
3. ₹ 10,000 (Gain).
4. ₹ 12,000 (Gain).

C. B’s share of Goodwill would be ______.

1. ₹ 1,30,800.
2. ₹ 43,600.
3. ₹ 72,000.
4. ₹ 24,000.

D. Entry for adjusting B’s share of profit or loss till the date of death would be:

1. 
   

   A’s Capital A/c   ...Dr.	₹ 38,150	-
   C’s Capital A/c   ...Dr.	₹ 5,450	-
   To B’s Capital A/c	-	₹ 43,600

2.  

   A’s Capital A/c   ...Dr.	₹ 1,750	-
   C’s Capital A/c   ...Dr.	₹ 250	-
   To B’s Capital A/c	-	₹ 2,000

3. 
   

   A’s Capital A/c   ...Dr.	₹ 21,000	-
   C’s Capital A/c   ...Dr.	₹ 3,000	-
   To B’s Capital A/c	-	₹ 24,000

4. 
   

   Profit & Loss Suspense A/c   ...Dr.	₹ 2,000	-
   To B’s Capital A/c	-	₹ 2,000

E. Amount transferred to B’s executor’s account will be ______.

1. ₹ 2,47,600.
2. ₹ 2,61,600.
3. ₹ 2,59,600.
4. ₹ 2,45,600.

Answer 1

A. Gaining the ratio of A and C would be 7 : 1.

B. B’s share in gain (profit)/loss on revaluation of assets and reassessment of liabilities would be 12,000 (Gain).

C. B’s share of Goodwill would be ₹ 43,600.

D. 

A’s Capital A/c   ...Dr.	₹ 1,750	-
C’s Capital A/c   ...Dr.	₹ 250	-
To B’s Capital A/c	-	₹ 2,000

E. Amount transferred to B’s executor’s account will be ₹ 2,47,600.