Question

Akshat, Javed and Gaurav are partners in a firm sharing profits in the ratio of 5 : 3 : 7. Akshat died on 31st March, 2024. Javed and Gaurav decided to share the profits in reconstituted firm in the ratio 2 : 3. The capital accounts of the partners on 31st March, 2024, before considering the firm’s goodwill were:

Akshat	₹ 1,66,000
Javed	₹ 66,000
Gaurav	₹ 1,41,000

After considering the adjustment for goodwill, Akshat’s share was determined to be ₹ 1,81,000. It was decided that this amount would be paid to Akshat’s executor immediately by the firm through a cheque, the amount being contributed by Javed and Gaurav in such a manner that their capitals would become proportionate to their new profit-sharing ratio.

You are required to pass journal entries to record:

1. The adjustment for self-generated goodwill of the firm.
2. Cash brought in by Javed and Gaurav to pay off Akshat’s executor.
3. Payment made to Akshat’s executor.

Answer 1

Journal Entries
Sr. No.	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Javed’s Capital A/c   ...Dr.		9,000	-
	Gaurav’s Capital A/c   ...Dr.		6,000	-
	To Akshat’s Capital A/c		-	15,000
	(Being Akshat compensated for his share of goodwill)
2.	Bank A/c   ...Dr.		1,81,000	-
	To Javed’s Capital A/c		-	89,200
	To Gaurav’s Capital A/c		-	91,800
	(Being Cash brought in by Javed and Gaurav to pay off Akshat’s Executor)
3.	Akshat’s Executor’s A/c   ...Dr.		1,81,000	-
	To Bank A/c		-	1,81,000
	(Being Akshat’s executor paid off)