Question

Abha, Beena and Chanda were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. Abha died on 1st July, 2025. The Partnership Deed provided that Abha’s executors are entitled to her share of profit till the date of death calculated on the basis of sales for the immediate previous year. Sales for the year ended 31st March, 2025 was 12,00,000 and the profit for the same year was ₹ 3,00,000. Sales show a growth trend of 20%, and the percentage of profit earning remains the same.

Journalise the transaction along with working notes.

Answer 1

Journal Entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
July 1	Profit & Loss Suspense A/c ...Dr.		45,000	-
	To Abha’s Capital A/c		-	45,000
	(Being Abha’s share of estimated profit up to her date of death credited to her capital account, incorporating a 20% sales growth trend)

Working Note:

Calculation of Intervening Period:

The time from the start of the current financial year (1st April, 2025) to the date of death (1st July, 2025) is exactly 3 months.

Calculation of Profit Percentage to Sales (based on previous year’s data):

Profit Percentage = `"Previous year’s profit"/"Previous year’s sales" xx 100`

Profit Percentage = `"(3,00,000)/(12,00,000) xx 100`

= 25%

Calculation of Estimated Annual Sales for the current year:

Estimated Annual Sales = `12,00,000 + (12,00,000 xx 20/100)`

= 12,00,000 + 2,40,000

= 14,40,000

Calculation of Estimated Sales and Profit for the 3-Month:

Estimated 3 month sales = `14,40,000 xx 3/12`

= 3,60,000

Estimated 3 month profit = `3,60,000 xx 25/100`

= 90,000

Calculation of Abha’s Share of Profit:

Old Profit-Sharing Ratio (Abha : Beena : Chanda) = 5 : 3 : 2

Abha’s share proportion = `5/10`

Abha’s share of profit = `90,000 xx 5/10`

= 45,000