Question

You are given the Balance Sheet of A, B and C who are partners sharing profits in the ratio of 2 : 2 : 1 as at March 31, 2025.

Liabilities	Amount (₹)	₹	Assets	₹
Creditors		40,000	Goodwill	30,000
Reserve Fund		25,000	Fixed Assets	60,000
Capitals			Stock	10,000
A	30,000		Sundry Debtors	20,000
B	25,000		Cash at Bank	15,000
C	15,000	70,000
		1,35,000		1,35,000

B died on June 15, 2025. According to the Deed, his legal representatives are entitled to:

1. Balance in Capital Account;
2. Share of goodwill valued on the basis of thrice the average of the past 4 year’s profits;
3. Share in profits up to the date of death on the basis of average profits for the past 4 years;
4. Interest on capital account @ 12% p.a.

Profits for the years ending on March 31 of 2022, 2023, 2024, 2025 respectively were ₹ 15,000, ₹ 17,000, ₹ 19,000 and ₹ 13,000.

B’s legal representatives were to be paid the amount due. A and C continued as partners by taking over B’s share equally. Work out the amount payable to B’s legal representatives.

Answer 1

Dr.	B’s Capital A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Goodwill A/c	12,000	By balance b/d	25,000
To B’s Executor’s A/c	44,158	By A’s Capital A/c	9,600
		By C’s Capital A/c	9,600
		By A’s Capital A/c	666
		By C’s Capital A/c	667
		By Reserve Fund A/c	10,000
		By Interest on Capital A/c	625
	56,158		56,158

Working notes:

1. Old ratio of A, B & C = 2 : 2 : 1

B died, on 15th June 2022

2.5 months (i.e., from 1st April 2022 to 15th June 2022)

A & C taking over B’s share equally (1 : 1) 

Gaining ratio = Take ratio (i.e., 1 : 1)

2. Average Profit = `(15,000+17,000+19,000+13,000)/4`

= `(64,000)/4`

= ₹ 16,000

Goodwill = ₹ 16,000 × 3

= ₹ 48,000

B’s share of Goodwill = `48,000xx2/5`

= ₹ 19,200

3. Average Profit = ₹ 16,000

B’s share in profit = `16,000xx2.5/12xx2/5`

= ₹ 1,333

4. Interest Capital = `25,000xx12/100xx2.5/12`

= ₹ 625