Question

On 31st March, 2014, the Balance Sheet of Pooja, Qureshi and Ross, who were partners in a firm was as under:
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Liabilities		Amount (₹)	Assets	Amount (₹)
Sundry Creditors		2,50,000	Building	2,60,000
Reserve Fund		2,00,000	Investment	1,10,000
Capital A/cs:			Qureshi's Loan	1,00,000
Pooja	1,50,000		Debtors	1,50,000
Qureshi	1,00,000	3,50,000	Stock	1,20,000
Ross	1,00,000		Cash	60,000
		8,00,000		8,00,000

   
Qureshi died on 1st July, 2014. The profit-sharing ratio of the partners was 2 : 1 : 1. On the death of a partner, the partnership deed provided for the following:
(i) His share in the profits of the firm till the date of his death will be calculated on the basis of average profits of last three completed years.
(ii) Goodwill of the firm will be calculated on the basis of total profit of last two years.
(iii) Interest on loan given by the firm to a partner will be charged at the rate of 6% p.a. or ₹ 4,000, whichever is more.
(iv) Profits for the last three years were ₹ 45,000; ₹ 48,000 and ₹ 33,000.
Prepare Qureshi's Capital Account to be rendered to his executors.

Answer 1

Qureshi’s Capital A/c

Date		Particulars	Amount (₹)	Date	Particulars	Amount (₹)
2014				2014
July 01		To Qureshi’s Loan A/c (WN3)	1,04,000	April 01	By balance b/d	1,00,000
2015				July 01	By Pooja’s Capital A/c (WN1)	13,500
March 31		To balance c/d	68,875	July 01	By Ross’s Capital A/c (WN1)	6,750
				July 01	By Profit & Loss Suspense A/c (WN2)	2,625
				July 01	By Reserve Fund A/c	50,000
					(2,00,000 × 1/4)
			1,72,875			1,72,875

 Working Notes:                              
1) Calculation of Qureshi’s Share of Goodwill:

Goodwill	=	₹ (48,000 + 33,000) = ₹ 81,000
Qureshi’s Share of Goodwill	=	₹ (81,000 × `1/4`) = ₹ 20,250
Gaining Ratio	=	Pooja : Ross = 2 : 1
Amount debited to Pooja’s Capital A/c	=	₹ (20,250 × `2/3`) = ₹ 13,500
Amount debited to Ross’s Capital A/c	=	₹ (20,250 × `1/3`) = ₹ 6,750

2) Calculation of Qureshi’’s Share of Loss till the date of his death:

Average Profit of the last three years	= `₹ (45,000 + 48,000 + 33,000)/3` = ₹ 42,000
Qureshi’s share of loss till the date of death	= Previous year’s loss × Qureshi’s Share of Loss × Months till the date of his death/12
	= ₹ `42,000 × 1/4 × 3/12`
	= ₹ 2,625

3) Calculation of Amount due on account of Loan given to Qureshi:

Loan given to Qureshi by a firm	= ₹ 1,00,000
Amount of interest till 1st July, 2014	= ₹ `(1,00,000 × 6/100 × 3/12)` = ₹ 1,500
Total Amount due to firm on 1st July	= Loan amount + Amount of Interest
	= ₹ (1,00,000 + 4,000) = ₹ 1,04,000 [As 4,000 > Amount of Interest]