Question

P, Q and R were partners in a firm sharing profits and losses in the ratio of 2:1:2. Their balance sheet on 31^st March, 2022 was as follow:

Balance sheet of P, Q and R as on 31.3.2022
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Creditors		48,000	Bank		25 000
Bills Payable		22,000	Debtors		75,000
General Reserve		80,000	Stock		2,00,000
Profit for 2021-22		2,00,000	Machinery		3,00,000
Capitals:			Land and Building		10,00,000
p	5,00,000	12,50,000
Q	2,50,000
R	5,00,000
		16,00,000			16,00,000

On 30^th June, 2022, Q died. The partnership deed provided that on the death of a partner his executors will be entitled for the following:

1. Balance in his capital account.
2. Interest on capital @ 6% p.a.
3. His share in the profits of the firm till the date of his death calculated on the basis of last year's profit.
4. His share in the goodwill of the firm calculated on the basis of the three years purchase of the average profits of last four years.

Profits for 2018-19 were ₹ 3,00,000, for 2019-20 were ₹ 4,00,000 and for  2020-21 were ₹ 1,00,000.

On 1.6.2022 Q withdrew ₹ 50,000 for meeting his medical expenses.

Prepare Q's Capital account on his death to be presented to his executors. 

Answer 1

Interest on capital =`2,50,000 xx 6/100 xx 3/12 = ₹ 3,750`

Share of profit =`2,00,000 xx1/5 xx3/12 = ₹ 10,000`

Dr.	Q's Capital Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Drawings A/c	50,000	By Balance b/d	2,50,000
To Q's Executors A/c	4,19,750	By Interest on Capital A/c	3,750
		By Profit & Loss Suspense A/c	10,000
		By General Reserve	16,000
		By P's Capital A/c (Goodwill)	75,000
		By A's Capital A/c (GoodWill)	75,000
		By Profit for 2021-22 (2,00,000 × 1/5)	40,000
	4,69,750		4,69,750

Working Note:

Average Profit = `(3,00,000 + 4,00,000 + 1,00,000 + 2,00,0000)/4 = ₹ 2,50,000`

Goodwill = `3xx2,50,000 = ₹ 7,50,000`

Share of Q = `7,50,000 xx1/5 = ₹ 1,50,000`  [Given by P and Q equally]