Question

Iqbal and Kamal are in partnership sharing profits and losses in 3 : 2. Kamal died three months after the date of the last Balance Sheet. According to the Partnership Deed, his legal heir is entitled to the following:

1. His capital as per the last Balance Sheet.
2. Interest on above capital @ 3% p.a. till the date of death.
3. His share of profit till the date of death is calculated on the basis of last year’s profits.

His drawings are to bear interest at an average rate of 2% on the amount irrespective of the period.

The net profits for the last three years, after charging an insurance premium, were ₹ 20,000; ₹ 25,000 and ₹ 30,000, respectively. Kamal’s capital as per Balance Sheet was 40,000 and his drawings till the date of death were 5,000.

Draw Kamal’s Capital Account to be rendered to his representatives.

Answer 1

Dr.	Kamal’s Capital Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Drawings A/c	5,000	By Balance b/d	40,000
To Interest on Drawings A/c	100	By Interest on Capital A/c	300
To Kamal’s Executor’s A/c (balancing figure)	38,200	By Profit & Loss Suspense A/c (Share of profit)	3,000
	43,300		43,300

Working Notes:

Interest on Capital = `40,000 xx 3/100 xx 3/12`

= 300

Kamal’s Share of Profit = `30,000 xx 3/12 xx 2/5`

= 3,000

Interest on Drawings = `5,000 xx 2/100`

= 100