Question

X, Y and Z were partners in a firm sharing profit in 3 : 2 : 1. The firm closes its books on 31st March every year. Y died on 30th June, 2018. On Y's death goodwill of the firm was valued at ₹ 60,000. Y's share in the profit of the firm till the date of his death was to be calculated on the basis of previous year's profit which was ₹ 1,50,000.
Pass necessary Journal entries for goodwill and Y's share of profit at the time of his death.

Answer 1

Journal Entry
Date	Particulars	L.F.	Debit Amount (₹)	Credit Amount (₹)
2018
June 30	X’s Capital A/c   ...Dr.		15,000
	Z’s Capital A/c   ..Dr.		5,000
	To Y’s Capital A/c			20,000
	(Y’s share of goodwill adjusted through X and Y’s Capital Account in gaining ratio, i.e. 3 : 1)
June 30	Profit and Loss Suspense A/c   ...Dr.		12,500
	To Y’s Capital A/c			12,500
	(Y’s profit share till his death debited to P&L Suspense A/c)

Working Notes:
(1) Calculation of Y's Share of Goodwill

Goodwill of the firm = Rs 60,000

Y's share of goodwill = `60,000 xx 2/6`

= ₹ 20,000

20,000 will be debited to X's and Z's capital A/c in gaining ratio of 3 : 1

X will pay = `20,000 xx 3/4`

= ₹ 15,000

Z will pay = `20,000 xx 1/4`

= ₹ 5,000

(2) Calculation of Y's Share of Profit

Previous yeras profit = ₹ 1,50,000

Y's share of profit (till death) = previous years profit x Ys profit share x 3 months (April 01, 2017)

Y's share of profit (till death) = `1,50,000 xx 2/6 xx 3/12`

= ₹ 12,500