Question

Ajay, Bhawna and Shreya were partners sharing profits in the ratio of 2 : 2 : 1. On 1st July, 2025, Shreya died. The books of accounts are closed on 31st March every year. Sales for the year 2024-25 ₹ 5,00,000 and that from 1st April to 30th June, 2025, were ₹ 1,40,000. Rate of profit during the past three years had been 10% on sales. Since Shreya’s legal representative was her only son, who is differently abled, it was decided that the profit for the purpose of settling Shreya’s account is to be calculated as 20% on sales.

Calculate Shreya’s share of profits till the date of her death and pass the necessary journal entry for the same.

Answer 1

Journal Entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2025 July 1	Profit & Loss Suspense A/c   ...Dr.		5,600	-
	To Shreya’s Capital A/c		-	5,600
	(Being Shreya’s share of estimated profit up to her date of death credited to her capital account at the specially agreed rate of 20% on sales)

Calculation of Estimated Profit for the Intervening Period:

Sales during the period = ₹ 1,40,000

Agreed profit rate for settlement = 20% on sales

Estimated Profit = Sales for the period × Agreed Profit Rate

Estimated Profit = `1,40,000 × 20/100`

= 28,000

Calculation of Shreya’s Share of Profit:

Old Profit-Sharing Ratio (Ajay : Bhawna : Shreya) = 2 : 2 : 1

Shreya’s share proportion = `1/5`

Shreya’s share of profit = `28,000 xx 1/5`

= 5,600