Question

Chandni, Bhanu, and Garima were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. The firm closes its books on 31st March every year. On 1st October, 2024, Chandni died. On that date, her capital account showed a credit balance of ₹ 3,00,000. On the date of Chandni’s death, the firm had a General Reserve of ₹ 60,000. The partnership deed provided that on the death of a partner, her representatives will be entitled to the following:

1. Balance in the Capital Account and interest on the same @ 10% p.a.
2. Her share in the goodwill of the firm. The goodwill of the firm on Chandni’s death was valued at 1,20,000.
3. Her share in the profits of the firm to be calculated on the basis of the previous year’s profit. The profit of the firm for the year ended 31st March 2024 was 4,50,000.

Prepare Chandni’s Capital Account to be presented to her executors.

Answer 1

Dr.	Chandni’s Capital Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Chandni’s Executors’ A/c (balancing figure)	5,17,500	By Balance b/d	3,00,000
		By Interest on Capital A/c	15,000
		By General Reserve A/c	30,000
		By Bhanu’s Capital A/c	36,000
		By Garima’s Capital A/c	24,000
		By Profit & Loss Suspense A/c	1,12,500
	5,17,500		5,17,500

Working Notes:

Time Period till Death: From 1st April 2024 to 1st October 2024 = 6 months

Interest on Capital = `3,00,000 xx 10/100 xx 6/12`

= ₹ 15,000

Share in General Reserve = `60,000 xx 5/10`

= ₹ 30,000

Total Firm Goodwill = ₹ 1,20,000

Chandni’s Share = `1,20,000 xx 5/10`

₹ 60,000

Share of Profit (till date of death) = `4,50,000 xx 6/12 xx 5/10`

= ₹ 1,12,500