Question

The Balance Sheet of Sindhu, Rahul and Kamlesh, who were sharing profits in the ratio of 3 : 3 : 4 respectively, as at 31st March, 2023 was as follows:

Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)
General Reserve		10,000	Cash	32,000
Bills Payable		20,000	Stock	88,000
Loan		24,000	Investments	94,000
Capitals:			Land & Building	1,20,000
Sindhu	1,20,000		Sindhu’s Loan	20,000
Rahul	1,00,000
Kamlesh	80,000	3,00,000
		3,54,000		3,54,000

Sindhu died on 31st July 2023. The partnership deed provided for the following on the death of a partner:

1. Goodwill of the firm be valued at two year's purchase of average profits for the last three years which were ₹ 80,000.
2. Sindhu’s share of profit till the date of his death was to be calculated on the basis of sales. Sales for the year ended 31st March, 2023 amounted to ₹ 8,00,00 and that from 1st April to 31st July 2023 ₹ 3,00,000. The profit for the year ended 31st March, 2023 was ₹ 2,00,000.
3. Interest on capital was to be provided @ 6% p.a.

Prepare Sindhu’s Capital Account to be rendered to his executor.

Answer 1

Dr.	Sindhu’s Capital A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Sindu’s loan A/c	20,000	By Balance b/d	1,20,000
To Sindu’s Executor A/c	1,75,900	By Rahul’s Capital A/c	20,571
		By Kamlesh’s Capital A/c	27,429
		By P & L Suspense A/c	22,500
		By General Reserve A/c	3,000
		By Interest on Capital A/c	2,400
	1,95,900		1,95,900

Working Notes:

1. Old ratio of Sindu, Rahul & Kamlesh = 3 : 3 : 4

Sindhu died, 

New ratio of Rahul & Kamlesh = 3 : 4

Gaining ratio = New Ratio (i.e., 3 : 4)

2. Goodwill = Average Profit × No. of year’s Purchase

= 80,000 × 2

= ₹ 1,60,000

Sindhu’s share of Goodwill = `1,60,000xx3/10`

= ₹ 48,000

3. % of Profit on the basis of sales = `(2,00,000)/(8,00,000)xx100`

= 25%

4 months (i.e., from 1st April 2020 to 31st july 2020)

Sindhu’s share of profit = `3,00,000xx25/100xx3/10`

= ₹ 22,500

4. Interest on capital = `1,20,000xx6/100xx4/12`

= ₹ 2,400