Question

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.

Answer 1

 

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