Question

Sunny, Honey and Rupesh were partners in a firm. On 31st March, 2014, their Balance Sheet was as follows:
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Liabilities		₹	Assets	₹
Creditors		10,000	Plant and Machinery	40,000
General Reserve		30,000	Furniture	15,000
Capital A/cs:			Investments	20,000
Sunny	30,000		Debtors	20,000
Honey	30,000		Stock	20,000
Rupesh	20,000	80,000		25,000
		1,20,000		1,20,000

   
Honey died on 31st December, 2014. The Partnership Deed provided that the representatives of the deceased partner shall be entitled to:
(a) Balance in the Capital Account of the deceased partner.
(b) Interest on Capital @ 6% per annum up to the date of his death.
(c) His share in the undistributed profits or losses as per the Balance Sheet.
(d) His share in the profits of the firm till the date of his death, calculated on the basis of rate of net profit on sales of the previous year. The rate of net profit on sales of previous year was 20%. Sales of the firm during the year till 31st December, 2014 was ₹ 6,00,000.
Prepare Honey's Capital Account to be presented to his executors.

Answer 1

Honey’s Capital A/c

Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Executor’s A/c		81,350	Balance b/d	30,000
			Interest on Capital	1,350
			Profit and Loss Suspense A/c	40,000
			General Reserve	10,000
		81,350		81,350

Working Notes:

WN1 Calculation of Interest on Honey’s Capital

`"Interest on capital" = 30,000 xx 6/100 xx 9/12 = "Rs"  1,350`

WN2 Calculation of Honey’s share in profits

`"Profit" = "Sales" xx "Rate of profit"/100`

             = `6,00,000 xx 20/100 = "Rs"  1,20,000`

`"Honeys share in profits" = 1,20,000 xx 1/3 = "Rs"  40,000`

WN3 Calculation of Honey’s Share in General Reserve

Honey's shre in general reserve = `30,000 xx 1/3 = "Rs"  10,000`