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Virad, Vishad and Roma Were Partners Sharing Profits in the Ratio of 5 : 3: 2 Respectively. on March 31, 2013, Their Balance Sheet as Under. Prepare Virad'S Capital Account to Be Presented to His Executors as on October 1, 2013. - Accountancy

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Virad, Vishad and Roma were partners sharing profits in the ratio of 5 : 3: 2 respectively. On March 31, 2013, their Balance Sheet as under.

Liabilities Amount(Rs.) Assets Amount(Rs.)

Capital:

       Virad      3,00,000

       Vishad    2,50,000

       Roma      1,50,000 

Reserve Fund

Creditors

 

 

 

 

7,00,000

60,000

1,10,000

 

Building

Machinery

Patents

Stock

Debtors

Cash

 

2,00,000

3,00,000

1,10,000

1,00,000

80,000

80,000

 

  8,70,000   8,70,000

Virad died on October 1, 2013. It was agreed between his executors and the remaining partner's that:

a. Goodwill of the firm is valued at 2 ½ years purchase of average profits for the last three years. The average profits were Rs.1,50,000.

b. Interest on capital is provided at 10% p.a.

c. Profit for the year 2013-14 is taken as having accrued at the same rate as that of the previous year which was Rs.1,50,000.

Prepare Virad's Capital Account to be presented to his Executors as on October 1, 2013.

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Solution

 

Virad’s Capital Account
Particulars Amount(Rs.) Particulars Amount(Rs.)
Dr.   Cr.

To Executor’s A/c

 

 

 

 

 

 

 

5,70,000

 

 

 

 

 

 

 

By Balance b/d

By Vishad’s Capital A/c

By Roma Capital A/c

By Profit and Loss Suspense A/c

By Reserve Fund A/c

By Interest on Capital A/c

 

 

3,00,000

1,12,500

75,000

37,500

30,000

15,000

 

 

  5,70,000   5,70,000

Calculation of Gaining Ratio of Vishad and Roma:

              Virad: Vishad: Roma

Old Ratio = 5 : 3 : 2

New Ratio =     3 : 2

Gaining Ratio= New Ratio Old Ratio

Vishad's Gain= (3/5) - (3/10) = 3/10

Roma's Gain = (2/5) - (2/10) = 2/10

Gaining Ratio = 3:2

WN 1: Calculation of Virad’s Share of Goodwill

Goodwill of the firm = Average Profit x Number of year's purchese

Goodwill of the firm = 1,50,000 x 2 ½ = 3,75,000

share of Goodwill of Virad's = 3,75,000 x (5/10) = 1,87,500

Vishad Will give = 1,87,500 x (3/5) = 1,12,500

Roma will give = 1,87,500 x 25 = 75,000

WN 2: Calculation of Profit share of Virad

Profit for the year =1,50,000

Virad'share of Profit = 1,50,000 x (6/12) x (5/10) = 37,500

WN 3: Calculation Of Interest on Virad's capital

Virad's Capital =3,00,000

Virad's Capital = 3,00,000 x (6/12) x (5/10) = 15,000

WN 4: Virad's share of Reserve fund

Share of Reserve Fund =60,000 x (5/10) = 30,000

Concept: Change in the Profit Sharing Ratio Among the Existing Partners
  Is there an error in this question or solution?
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