Question

Nirmala, Divisha and Sara were partners in firm sharing profits and losses in the 3 : 4 : 3. Books were closed on 31st March every year. Sara died on 1st February, 2022. As per the partnership deed, Sara's executors are entitled to her share of profit till the date of death on the basis of Sales turnover. Sales for the year ended 31st March 2021 was ₹ 10,00,000 and profit for the same year was ₹ 1,20,000. Sales show a positive trend of 20% and the percentage of profit earning is reduced by 2%.

Journalise the transaction along with the working notes.

Answer 1

Journal Entry
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.02.22	Profit and Loss Suspense A/c    ...Dr.		30,000
	To Sara’s Capital A/c			30,000
	(Being Sara’s share of profit allowed till the date of her death)

Working Notes- 

Profit % to sales turnover for the year ended 31st March, 2021 -

= `120000/1000000 xx 100 = 12%`

Estimated sales for the year ended 31st March, 2022 -

₹ 10,00,000 + 20% of ₹ 10,00,000 = ₹ 12,00,000

Estimated sales till 01st February,2022 = `₹ 12,00,000 xx 10/12` = ₹ 10,00,000

Profit percentage 12 - 2 = 10%

Profit amount till 01st February, 2022 = 10% of ₹ 10,00,000 = ₹ 1,00,000

Sara’s share of profit till 1st February, 2022 -

`(1,00,000 xx 3)/10`

= ₹ 30,000