Question

A, B and C were partners in a printer manufacturing firm. They were sharing profits and losses in the ratio of 2 : 2 : 1. On 31^st March, 2022 their Balance Sheet was as follows:

Balance Sheet of A, B and C as on 31st March, 2022
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)
Capitals:			Land and Building	3,00,000
A	1,50,000	5,50,000	Plant and Machinery	2,50,000
B	2,00,000		Debtors	80,000
C	2,00,000		Stock	70,000
General Reserve		2,50,000	Cash in hand	60,000
Creditors		30,000	Cash at Bank	90,000
Bills Payable		20,000
		8,50,000		8,50,000

B died on 30^th June, 2022. According to the partnership deed, his legal representatives are entitled to:

1. ₹ 24,000 for his share of Goodwill.
2. Interest on capital @ 12% p.a.
3. His share of profit till the date of death calculated on the basis of sales. The sales from 1^st April, 2022 to 30^th June, 2022 were ₹ 1,25,000. The sales and profits of the firm for the year ending 31^st March, 2022 were ₹ 10,00,000 and ₹ 2,50,000 respectively.

Prepare B's Capital Account to be rendered to his legal representatives.

Answer 1

Dr.	B's Capital Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To B's Executor's A/c	3,42,500	By Balance b/d	2,00,000
		By General Reserve A/c	1,00,000
		By Interest on Capital A/c	6,000
		By A's Capital A/c (Goodwill)	16,000
		By C's Capital A/c (Goodwill)	8,000
		By Profit and Loss Suspense A/c	12,500
	3,42,500		3,42,500

Working Notes:

1. B's share in General Reserve = `₹ 2,50,000xx2/5`= ₹ 1,00,000
   
   
2. Interest on B's Capital = `₹ 2,00,000 xx 12/100xx 3/12` = ₹ 6,000
   
   
3. B's share in Goodwill = ₹ 24,000 (Given)
   This will be compensated by A and C in their gaining ratio i.e, 2: 1.
   
   A will compensate = `₹ 24,000xx 2/3 = ₹ 16,000`
   
   C will compensate =`₹ 24,000 xx 1/3 = ₹ 8,000`
   
   
4. Calculation of B's share of Profit upto the date of death:
   
   Percentage of profit to sales for the. year ended 31^st March, 2022
   = `(₹ 2,50,000)/(₹ 10,00,000)xx100` = 25%
   
   Profit upto the date of B's death = 25% of ₹ 1,25,000
   =`25/100 xx ₹ 1,25,000` = ₹ 31,250
   
   B's share of profit = `₹ 31,250 xx 2/5 = ₹ 12,500`