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X, Y And Z Were Partners in a Firm Sharing Profit in 3 : 2 : 1. the Firm Closes Its Books on 31st March Every Year. - Accountancy

Numerical

X, Y and Z were partners in a firm sharing profit in 3 : 2 : 1. The firm closes its books on 31st March every year. Y died on 30th June, 2018. On Y's death goodwill of the firm was valued at ₹ 60,000. Y's share in the profit of the firm till the date of his death was to be calculated on the basis of previous year's profit which was ₹ 1,50,000.
Pass necessary Journal entries for goodwill and Y's share of profit at the time of his death.

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Solution

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

2018

 

 

 

 

June 30

X’s Capital A/c

Dr.

 

15,000

 

 

Z’s Capital A/c

Dr.

 

5,000

 

 

    To Y’s Capital A/c

 

 

 

20,000

 

(Y’s share of goodwill adjusted through X and Y’s Capital Account in gaining ratio, i.e. 3 : 1)

 

 

 

 

June 30

Profit and Loss Suspense A/c

Dr.

 

12,500

 

 

   To Y’s Capital A/c

 

 

 

12,500

 

(Y’s profit share till his death debited to P&L Suspense A/c)

 

 

 

 

Working Notes:
WN 1: Calculation of Y's Share of Goodwill

Goodwill of the frim = Rs 60,000

Y's share of goodwill = `60,000xx 2/3 = "Rs"  20,000`

20,000 will be debited to X's & Z's capital A/c in gaining ratio of 3 : 1

X will pay = `20,000 xx 3/4 = "Rs"  15,000`

Z will pay = `20,000 xx 1/4 = "Rs"  5,000`

WN 2: Calculation of Y's Share of Profit

Previous yeras profit = Rs 1,50,000

Y's share of profit (till death) = previous years profit x Ys profit share x 3 months (April 01, 2017)

Y's share of profit (till death) = `1,50,000 xx 2/6 xx 3/12 = "Rs"  12,500`

Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio
  Is there an error in this question or solution?
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APPEARS IN

TS Grewal Class 12 Accountancy - Double Entry Book Keeping Volume 1
Chapter 6 Retirement/Death of a Partner
Exercise | Q 62 | Page 94
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