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Vikas, Gagan and Momita Were Partners in a Firm Sharing Profits in the Ratio of 2: 2: 1. the Firm Closes Its Books on 31st March Every Year. on 30th September 2014 Momita Died. According to the Provisions of Partnership Deed the Legal Representatives of a Deceased Partner Are Entitled to the Following in the Event of His/Her Death: - CBSE (Arts) Class 12 - Accountancy

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Question

Vikas, Gagan and Momita were partners in a firm sharing profits in the ratio of 2: 2: 1. The firm closes its books on 31st March every year. On 30th September 2014 Momita died. According to the provisions of partnership deed the legal representatives of a deceased partner are entitled to the following in the event of his/her death:

1) Capital as per the last Balance Sheet.

2) Interest on capital at 6% p.a. till the date of her death.

3) Her share of profit to the date of death calculated on the basis of average profits of last four years.

4) Her share of goodwill to be determined on the basis of three years purchase of the average
profits of last four years. The profits of last four years were:

Years Profit (Rs)
2010 – 2011 30,000
2011 – 2012 50,000
2012 – 2013 40,000
2013 – 2014 60,000

The balance in Momita's capital account on 31-3-2014 was Rs 60,000 and she had withdrawn Rs 10,000 till the date of her death. Interest on her drawings was Rs 300. Prepare Momita's Capital Account to be presented to her executors.

Solution

C’s Capital Account
Dr.   Cr.
Particulars Rs Particulars Rs

To Executor A/c

 

 

 

 

 

14,812.50

 

 

 

 

 

By Balance c/d

By Interest on Capital A/c

By Profit and Loss Suspense A/c

By A’s Capital A/c

By B’s Capital A/c

By Reserve Fund A/c

7,500

112.50

750

3,500

1,750

1,200

  14,812.50   14,812.50

Working Notes:

WN 1 Calculation of Interest on C’s Capital

Interest on Capital = `7500 xx 6/100 xx 3/12 = 112.50`

WN2 Calculation of C’s share of profits
Profit of last financial year (2013-14) = 12,000

C's share in profits = `12000 xx 1/4 xx  3/12 = 750`

WN 3 Adjustment of Goodwill

Average Profit = `(9000 + 10500 + 12000)/3 = 10500`

Goodwill of the firm = 10,500 x 2 = 21,000

C's Share of Goodwill = `21000 xx 1/4 = 5250`

A will pay = `5250 xx  2/3 = 3500`

B will Pay = `5250 xx 1/3 = 1750`

WN 4 Calculation of C’s Share in Reserve Fund

C's Share in Reserve Fund = `4800 xx 1/8 = 1200`

Note: Since no information is provided with the share acquired by A and B, their gaining ratio is same as their new profit sharing ratio i.e. 2:1.

  Is there an error in this question or solution?

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Solution Vikas, Gagan and Momita Were Partners in a Firm Sharing Profits in the Ratio of 2: 2: 1. the Firm Closes Its Books on 31st March Every Year. on 30th September 2014 Momita Died. According to the Provisions of Partnership Deed the Legal Representatives of a Deceased Partner Are Entitled to the Following in the Event of His/Her Death: Concept: Preparation of Deceased Partner's Capital Account, Executor's Account.
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