Question

P, Q and R were partners in a water dispenser manufacturing firm. They were sharing profit and losses in the ratio of 2 : 2 : 1. On 31^st March, 2022, their Balance Sheet was as follows:

Balance Sheet. of P, Q and R as on 31st March 2022
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)
Capitals:			Plant and Machinery	1,25,000
P	50,000	2,75,000	Land and Building	1,50,000
Q	1,25,000		Debtors	40,000
R	1,00,000		Stock	35,000
General Reserve		1,25,000	Cash at Bank	75,000
Sundry Creditors		25,000
		4,25,000		4,25,000

Q died on 30^th June, 2022. According to the partnership deed, his legal representative were entitled to:

1. Interest on capital @ 12% p.a.
2. ₹ 12,000 for his share of Goodwill.
3. His share of profit till the date of death was to be calculated on the basis of sales. The sales from 1^st April 2022 to 30^th March 2022 were ₹ 62,500. The sales and profits of the firm for the year ending 31^st March 2022 was ₹ 5,00,000 and ₹ 1,25,000 representatives.

Answer 1

Dr.	Q's Capital Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Q's Executor's A/c	1,97,000	By Balance b/d	1,25,000
		By General Reserve A/c	50,000
		By Interest on Capital A/c	3,750
		By P's Capital A/c  (Goodwill)	8,000
		By R's Capital A/c (Goodwill)	4,000
		By Profit and Loss Suspense A/c	6,250
	1,97,000		1,97,000

Working Note:

(i) Q's Share in General Reserve = `₹ 1,25,000xx2/5 = ₹ 50,000`

(ii) Interest on Q's Capital = `₹ 1,25,000 xx 12/100 xx 3/12`= ₹ 3,750

(iii) Q's Share on Goodwill = ₹ 12,000 (Given)

This will be compensated by P and R in their gaining ratio, `i.e.`2 : 1

P will compensate = `₹ 12,000 xx 2/3 = ₹ 8,000`

R will compensate = `₹ 12,000 xx 1/3 = ₹ 4,000`

(iv) Calculation of Q's share of profit upto the date of death:

Percentage of Profit to Sales for the year ended 31^st March, 2022

=`(₹ 1,25,000)/(5,00,000)xx100` = 25% 

Profit upto the date of death = 25% of ₹ 62,500

=`25/100 xx ₹ 62,500 = ₹ 15,625`

Q' Share of Profit = `₹ 15,625 xx 2/5 = ₹ 6,250`