Sheetal, Anjali, Rajendra were sharing profits and losses as 7:5:4. Their Balance sheet as on 31st March, 2011:
Balance Sheet as on 31st March 2012
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
| Capital | Furniture | 17,000 | |
| Sheetal | 23,000 | Machinery | 18,000 |
| Anjali | 15,000 | Building | 16,000 |
| Rajendra | 12,000 | Cash | 37,000 |
| Bills Payable | 4000 | ||
| Creditors | 8000 | ||
| Loan | 10,000 | ||
| General Reserve | 16,000 | ||
| 88,000 | 88,000 |
Rajendra died on 30th June 2012 and the following adjustments were agreed as per deed.
1) Furniture, Machinery and Building are to be revalued at Rs 16,700/-, Rs 16,200, to Rs 30,100.
2) Rajendra’s share is goodwill to be valued from firm’s goodwill which was valued at two times the average profit of last three years. Profits of last three years Rs 30,000, Rs 25,000, Rs 20,000/-.
3) His profit upto the date of death is to be calculated on the basis of last years profit.
4) Rajendra was entitled to get a salary of Rs 800/-per month.
5) Interest on capital at 10% be allowed.
6) Rajendra’s drawing upto date of death were Rs 600 p.m.
Prepare:
1) Rajendra’s Capital A/c showing amount payable to his executor
2) Give working of share of goodwill and profit
Solution
Rajendra’s Capital Account
Dr. Cr.
| Particulars | Amount (Rs) | Particulars | Amount (Rs) |
| Drawings | 1,800 | Balance b/d | 12,000 |
| Executor’s A/c | 33,650 | Profit and Loss Adjustment A/c (Profit) | 3,000 |
| Goodwill | 12,500 | ||
| Profit and Loss Suspense A/c | 1,250 | ||
| Salary | 2,400 | ||
| Interest on Capital | 300 | ||
| General Reserve | 4,000 | ||
| 35,450 | 35,450 |
Working Notes:
WN 1:Calculation of share of Goodwill of Rajendra
i) Total Profit = 30000+25000+20000 = Rs. 75000
ii) Average Profit = `75000/3 = "Rs" 25000`
iii) Goodwill = 25000 × 2 = Rs 50000
iv) Share of Rajendra in Goodwill = `50000 xx 4/16 = "Rs" 12,500`
WN 2: Calculation of Share of Profit of Rajendra
Profit of the last year = Rs 20000
Profit for the period = `20000 xx 3/12 = "Rs" 5000`
Share of Rajendra's Profit =`5000 xx 4/16 = Rs 1250`
WN 3: Rajendra’s Share of General Reserve
Rajendra's Share of General Reserve = `16000 xx 4/16 = "Rs" 4000`
Note:
WN 4: Profit and Loss Adjustment Account
Profit and Loss Adjustment Account
Dr. Cr.
| Particulars | Amount (Rs) | Particulars | Amount (Rs) | |
| Furniture | 300 | Building | 14100 | |
| Machinery | 1800 | |||
| Profit transferred to: | ||||
| Sheetal’s Capital | 5250 | 12000 | ||
| Anjali’s Capital | 3750 | |||
| Rajendra’s Capital | 3000 | |||
| 14100 | 14100 | |||
Note: As per the book amount payable to Rajendra’s Executor is Rs 33,350 but as per our solution it is Rs 33,650.
