On 31st March, 2014, the Balance Sheet of Pooja, Qureshi and Ross, who were partners in a firm was as under:
|
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: Pooja |
1,50,000 |
Qureshi's Loan | 1,00,000 | ||
| Qureshi | 1,00,000 | Debtors | 1,50,000 | ||
| Ross | 1,00,000 | 3,50,000 | Stock | 1,20,000 | |
|
|
|
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.
Solution
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 |
