Question

Suresh, Naresh and Paresh were equal partners. On 31^st March, 2019 their Balance sheet was as follows:

Balance Sheet as on 31st March, 2019
Liabilities	Amount (₹)	Assets	Amount (₹)
Capital Accounts:		Land and Building	2,00,000
Suresh	2,50,000	Furniture	1,50,000
Naresh	1,00,000	Debtors	1,50,000
Paresh	1,00,000	Cash	1,00,000
Sundry creditors	1,50,000
	6,00,000		6,00,000

Suresh died on 30^th June, 2019 and the following adjustments were agreed as:

1. Furniture was to be adjusted to its market price of ₹ 1,70,000.
2. Land and building was to be depreciated by 10%.
3. Provide R.D.D. at 5% on debtors.
4. The profit up to the date of death of Suresh is to be calculated on the basis of average profit of last year which was ₹ 90,000.

Prepare:

1. Profit and loss adjustment account.
2. Partners’ capital account.
3. Balance sheet of the continuing firm.

Answer 1

Dr.	In the books of the Partnership Firm Profit and Loss Adjustment Account						Cr.
Particulars		Amount (₹)	Particulars		Amount (₹)	Amount (₹)
To Land and Building A/c		20,000	By Furniture A/c			20,000
To R.D.D. A/c		7,500	By Partners’ Capital A/c (Loss)
			Suresh		2,500	7,500
			Naresh		2,500
			Paresh		2,500
		27,500				27,500

 

Dr.	Partners’ Capital Account								Cr.
Particulars		Suresh (₹)	Naresh (₹)	Paresh (₹)	Particulars	Suresh (₹)	Naresh (₹)	Paresh (₹)
To Profit and Loss Adjustment A/c - Loss		2,500	2,500	2,500	By Balance b/d	2,50,000	1,00,000	1,00,000
To Suresh's Executor’s A/c		2,55,000	-	-	By Profit and Loss Suspense A/c	7,500	-	-
To Balance c/d		-	97,500	97,500
		2,57,500	1,00,000	1,00,000		2,57,500	1,00,000	1,00,000

 

Balance Sheet as on 30th June 2019
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capital Accounts:		1,95,000	Land and Building	2,00,000	1,80,000
Naresh	97,500		Less: Depreciation	20,000
Paresh	97,500		Furniture	1,50,000	1,70,000
Suresh's Executor’s A/c		2,55,000	Add: Appreciation	20,000
Sundry creditors		1,50,000	Debtors	1,50,000	1,42,500
			Less: R.D.D. (5%)	7,500
			Cash		1,00,000
			Profit and Loss Suspense A/c		7,500
		6,00,000			6,00,000

Working Note:

1. Profit upto the date of death of Suresh = (Average Profit) x (Proportionate Period)

= `90,000 xx 3/12`

= ₹ 22,500

2. Suresh's share in profit = (Proportionate Profit) x (Suresh's share)

= `22,500 xx 1/3`

= ₹ 7,500

Suresh's share in profit is debited to Profit and Loss Suspense Ale and credited to Suresh's Capital A/c.

3. R.D.D = 5% of Debtors = `5/100 xx 1,50,000`

= ₹ 7,500

4. The amount due to Suresh is transferred to his Executor's Loan A/c.