Question

Pranav, Karan and Rahim were partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1. On 31st March 2017 their Balance Sheet was as follows:

BALANCE SHEET OF PRANAV, KARAN AND RAHIM as at 31-3-2017
Liabilities	₹	₹	Assets	₹
Creditors	3,00,000		Fixed Assets	4,50,000
General Reserve	1,50,000		Stock	1,50,000
Capitals:			Debtors	2,00,000
Pranav	2,00,000		Bank	1,50,000
Karan	2,00,000
Rahim	1,00,000	5,00,000
Total		9,50,000	Total	9,50,000

Karan died on 12.6.2017. According to the partnership deed, the legal representatives of the deceased partner were entitled to the following:

1. Balance in his Capital Account
2. Interest on Capital @12% p.a.
3. The share of goodwill. Goodwill of the firm on Karan's death was valued at ₹ 60,000.
4. Share in the profits of the firm till the date of his death, calculated on the basis of last year’s profit. The profit of the firm for the year ended 31.3.2017 was ₹ 5,00,000.

Prepare Karan's Capital Account to be presented to his representatives.

Hints: Interest on Capital for 73 days ₹ 4,800; Share of Profit ₹ 40,000.

Answer 1

Karan’s Capital Account
Date	Particulars	Dr. ₹	Date	Particulars	Cr. ₹
2017 Jun 12	To Karan’s Executors A/c	3,28,800	2017 Jun 12	By Balance b/d	2,00,000
			2017 Jun 12	By Interest on Capital A/c (WN 1)	4,800
			2017 Jun 12	By Pranav’s Capital (Goodwill) (WN 2)	16,000
			2017 Jun 12	By Rahim’s Capital (Goodwill) (WN 2)	8,000
			2017 Jun 12	By Profit & Loss Suspense A/c (WN 3)	40,000
			2017 Jun 12	By General Reserve A/c	60,000
Total		3,28,800	Total		3,28,800

Working Note:

Interest on capital = `2,00,00 xx 12/100 xx 73/365 = 4800`

Karan’s Goodwill = `60000 xx 2/5 = 24000`

Profit till the date of death = `500000 xx 73/365 xx 2/5 = 40000`