Question

 A, B and C are partners in a firm whose books are closed on March 31^st each year. B died on 30^th June 2009 and according to the agreement, the share of profits of a deceased partner up to the date of death is to be calculated on the basis of the average profit for the last five year. The net profits for the last 5 years have been: 2005 , Rs 14,000; 2006 , Rs 18,000; 2007, Rs 16,000; 2008, Rs 10,000 (loss) and 2009, Rs 16,000. Calculate B’s share of the profits upto the date of death and pass necessary journal entry.

Answer 1

B’s Profit Share = `"Average Profit For last 5 years" xx"Time" xx"A's Share"` 

       = `"Rs"10,800` 

∴ B's Profit Share=`10,800xx3/12xx1/3="Rs"  900` 

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Profit and Loss Suspense A/c	Dr.		900
	To B’s Capital A/c				900
	(Profit share to the deceased partner)

Average Profit=`("Rs" 14,000+"Rs" 18,000+"Rs" 16,000-"Rs" 10,000+"Rs" 16,000)/5` 

=`"Rs" 10,800` 

B’s share of profit (from 31^st March 2008 to 30^th June, 2009) = Rs 10,800 × 3/12 × 2/6 = Rs 900. 

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Profit & Loss Suspense A/c	Dr.		900
	To B’s Capital A/c				900
	(Being distribution of profit to the deceased partner upto the date of death)