|Balance Sheet as on 31st March 2012|
|Liabilities||Amount (Rs)||Assets||Amount (Rs)|
|Capital A/c||Land and Building||50000|
|Sujata||20000||(–) R.D.D. 2500||35000|
|Creditors||16000||Cash at Bank||5000|
Sujata died on 1st July 2012 and the adjustments were agreed to as per the deed as follows:
(1) Land and Building to be valued at Rs. 60,000 and all debtors were good.
(2) Stock be depreciated by 10%.
(3) The drawings of Sujata up to the date of her death amounted to Rs. 2,000.
(4) Interest on capital was to be allowed at 10% p.a.
(5) The deceased partner’s share of goodwill is to be valued at 2 years’ purchase of average profit of last 3 years.
The profits were:
2009 – 10 = Rs. 15,000
2010 – 11 = Rs. 17,000
2011 – 12 = Rs. 13,000
(6) The deceased partner’s share of profit up to the date of her death should be based on the average profit of the last two years.
You are required to prepare:
(a) Profit and Loss Adjustment Account.
(b) Sujata’s Capital Account showing the balance payable to her Executor’s Loan Account.
(c) Working notes for calculation of (a) Goodwill and (b) Profit till the date of Sujata’s death.
|Profit and Loss Adjustment Account|
|Particulars||Amount (Rs)||Particulars||Amount (Rs)|
|Stock||Land and Building||10000|
|Profit transferred to Partners
|Provision for Doubtful Debts||2500|
|Sujata’s Capital Account|
|Date||Particulars||Amount (Rs)||Date||Particulars||Amount (Rs)|
|Sujata’s Executor’s Loan A/c
|29150||Interest on Capital||500|
|P & L Suspense A/c||750|
|P & L Adjustment A/c||19000|
WN1 Calculation of Interest on Capital
Interest on Capital = 20,000× 10/100 × 3/12 = Rs 500
WN2 Calculation of Share in Reserve Fund
Sujata's Share = 10000 x 1/5 = Rs 2000
WN3 Calculation of Goodwill
Average Profit = `(15000 + 17000 + 130000)/3 = Rs 15000`
Goodwill (Firm) = 15000 x 2 = Rs 30000
Sujata's share = 30000 x 1/5 = Rs 6000
WN4 Calculation of Share in Profit/Loss
Average Profit = `(17000 + 13000)/2 = Rs 15000`
Sujata's Share = 15000 xx 3/12 xx 1/5 = Rs 750