Question

Iqbal and Kapoor are in partnership sharing profits and losses in 3 : 2. Kapoor died three months after the date of the last Balance Sheet. According to the Partnership Deed, the legal heir is entitled to the following:
(a) His capital as per the last Balance Sheet.
(b) Interest on above capital @ 3% p.a. till the date of death.
(c) His share of profits till the date of death 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 insurance premium, were ₹ 20,000; ₹ 25,000 and ₹ 30,000 respectively. Kapoor's capital as per Balance Sheet was ₹ 40,000 and his drawings till the date of death were ₹ 5,000.
Draw Kapoor's Capital Account to be rendered to his representatives.

Answer 1

Kapoor’s Account

Dr.		Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Drawings A/c	5,000	Balance b/d	40,000
Interest on Drawings A/c	100	Interest on Capital A/c	300
Balance c/d	38,200	Profit and Loss Adjustment A/c	3,000
	43,300		43,300

 

Working Notes

WN1 Calculation of Interest on Capita of Kapoor till date of his death

`"Interest" = "Capital"  "rate"/100 xx "time"/12`

             = `40,000 xx 3/100 xx 3/12`

             = `300`

WN2 Calculation of Share of Profit of Kapoor till date of his death

`"Profits" = "Last Year's profit" xx "Time"/12 xx "share in profits"`

               = `30,000 xx 3/12 xx 2/5`

              = `3,000`

WN3 Calculation of Interest on Drawings

`"Interest" = "Drawings" xx 2%` 

                 =`5,000 xx 2 %`
                 = `100`