Question

Anuj, Tanuj and Vishesh were partners in a firm sharing profits in 2 : 2 : 1. Tanuj died on 31st July 2023. His capital on 1st April, 2023 was ₹ 6,00,000. You are informed that:

1. Tanuj is entitled to 6% p.a. interest on his capital.
2. He is entitled to his share of profit till the date of death on the basis of last year’s profit which were ₹ 2,40,000.
3. Land and Building with book value of ₹ 12,00,000 is undervalued by 40%.
4. Executors of Tanuj were paid 10,00,000 in full settlement of his account.

Prepare Tanuj’s Capital Account.

Answer 1

Dr.	Tanuj’s Capital		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Bank A/c	10,00,000	By Balance b/d	6,00,000
		By Interest on Capital A/c	12,000
		By Profit & loss suspense A/c	32,000
		By Revaluation A/c - Profit	3,20,000
		By Anuj’s Capital	24,000
		By Vishesh’s Capital	12,000
	10,00,000		10,00,000

 

Dr.	Revaluation A/c			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Revaluation Profit t/f to:		8,00,000	By Land & Building A/c	8,00,000
Anuj’s Capital	3,20,000
Tanuj’s Capital	3,20,000
Vishesh’s Capital	1,60,000
		8,00,000		8,00,000

Working Notes:

1. Calculation of undervalued of Land & Buildings

Let the previous value of Land & Buildings

⇒ `x -(40x)/100` = 12,00,000

⇒ `(60x)/100` = 12,00,000

⇒ x = `12,00,000xx100/60`

⇒ x = 20,00,000

Increases in Land & Buildings = ₹ 20,00,000 - ₹ 12,00,000

= ₹ 8,00,000

2. Calculation of Tanuj’s share in hidden goodwill

Final Payment to Tanuj	₹ 10,00,000
Tanuj adjusted capital before share in goodwill	₹ 9,64,000
Tanuj share in Hidden Goodwill	₹ 36,000

 Anuj’s & Vishesh’s will contributed it in their gaining ratio i.e., 2 : 1

Anuj’s will contribute = `36,000xx2/3` = ₹ 24,000

Vishesh’s will contribute = `36,000xx1/3` = ₹ 12,000