Question

Supriya, Surekha and Sujata were partners sharing profits and Losses in the ration of 2:2:1 respectively. Their Balance Sheet as on 31^st March 2012 was as follows:

Balance Sheet as on 31st March 2012
Liabilities	Amount (Rs)	Assets	Amount (Rs)
Capital A/c		Land and Building	50000
Supriya	40000	Stock	30000
Surekha	40000	Debtors        37500
Sujata	20000	(–) R.D.D.       2500	35000
Reserve Fund	10000	Furniture	10000
Creditors	16000	Cash at Bank	5000
Outstanding Expenses	4000
	1,30,000		1,30,000

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.

Answer 1

Profit and Loss Adjustment Account
Dr.			Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Stock		Land and Building	10000
Profit transferred to Partners Capital Account:		Provision for Doubtful Debts	2500
Supriya       3,800
Surekha       3,800
Sujata          1,900	9500
	12500		12500

 

Sujata’s Capital Account
Dr.					Cr.
Date	Particulars	Amount (Rs)	Date	Particulars	Amount (Rs)
	Drawings	2000		Balance b/d	20000
	Sujata’s Executor’s Loan A/c (Balancing Figure)	29150		Interest on Capital	500
				Reserve Fund	2000
				Goodwill A/c	6000
				P & L Suspense A/c	750
				P & L Adjustment A/c	19000
		31,150			31,150

Working Notes:

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