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X, Y And Z Were Partners in a Firm Sharing Profits and Losses in the Ratio of 3 : 2 : 1. Z Died on 30th June, 2018. - Accountancy

Numerical

XY and Z were partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. Z died on 30th June, 2018. The Balance Sheet of the firm as at that 31st March, 2018 is as follows:
 

BALANCE SHEET as at 31st March, 2018

Liabilities Amount
(₹)
Assets Amount
​(₹)
X's Capital A/c 2,40,000  

Machinery

2,40,000
Y's Capital A/c 1,60,000   Furniture 1,50,000

Z's Capital A/c

80,000 4,80,000 Investments 40,000
X's Current A/c 16,000 Stock 64,000
Y's Current A/c 5,000 Sundry Debtors                      50,000
Reserve 60,000 Bills Receivable 22,000
Bills Payable 34,000 Cash at Bank 37,000
Sundry Creditors 40,000 Cash in Hand 22,000
    Z's Current A/c 10,000
  6,35,000   6,35,000

 ​
The following decisions were taken by the remaining partners:
(a) A Provision for Doubtful Debts is to be raised at 5% on Debtors.
(b) While Machinery to be decreased by 10%, Furniture and Stock are to be appreciated by 5% and 10% respectively.
(c) Advertising Expenses ₹ 4,200 are to be carried forward to the next accounting year and, therefore, it is to be adjusted through the Revaluation Account.
(d) Goodwill of the firm is valued at ₹ 60,000.
(e) X and Y are to share profits and losses equally in future.
(f) Profit for the year ended 31st March, 2018 was ₹ 8,16,000 and Z's share of profit till the date of death is to be determined on the basis of profit for the year ended 31st March, 2018.
(g) The Fixed Capital Method is to be converted into the Fluctuating Capital Method by transferring the Current Account balances to the respective Partners' Capital Accounts.
Prepare the Revaluation Account, Partners' Capital Accounts and prepare C's Executors's Account to show that C's Executors were paid in two half-yearly instalments plus interest of 10% p.a. on the
unpaid balance. The first instalment was paid on 31st December, 2018.

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Solution

Revaluation Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Machinery

24,000

Furniture

7,500

Provision for Doubtful Debts

2,500

Stock

6,400

 

 

Prepaid Advertisement Expenses

4,200

 

 

Loss transferred to:

 

 

 

X’s Capital A/c

4,200

 

 

 

Y’s Capital A/c

2,800

 

 

 

Z’s Capital A/c

1,400

8,400

 

26,500

 

26,500

 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

Current A/c

 

 

10,000

Balance b/d

2,40,000

1,60,000

80,000

Revaluation A/c

4,200

2,800

1,400

Current A/c

16,000

5,000

 

Z ’s Capital A/c

 

10,000

 

Reserve

30,000

20,000

10,000

Z ’s Capital A/c

 

34,000

 

Y ’s Capital A/c

 

 

34,000

Z’s Executors A/c

 

 

1,22,600

Y ’s Capital A/c

 

 

10,000

Balance c/d

2,81,800

1,38,200

 

 

 

 

 

 

2,86,000

1,85,000

1,34,000

 

2,86,000

1,85,000

1,34,000

 

Z's Executor Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2018-19

 

 

 

2018-19

 

 

 

Dec. 31

Bank A/c (61,300 + 6,130)

 

67,430

Jun. 30

Z’s Capital A/c

 

1,22,600

Mar. 31

Balance c/d

 

62,832.5

Dec. 31

Interest 

 

6,130

 

 

 

 

Mar.31

Interest 

 

1,532.5

 

 

 

1,30,262.5

 

 

 

1,30,262.5

2019-20

 

 

 

2019-20

 

 

 

Jun. 30

Bank  (61,300 + 3,065)

 

64,365

April 01

Balance b/d

 

62,832.5

 

 

 

 

Jun. 30

Interest 

 

1,532.5

 

 

 

64,365

 

 

 

64,365

 

Working Notes:

WN1: Calculation of Profit & Loss Suspense

WN2: Calculation of Gaining Ratio and Share of Goodwill

Z's share of goodwill=`60,000 xx 1/6 = "Rs"  10,000` should be given by Y
Note:
Z’s share of profit is adjusted through Y’s capital A/c because there is change in profit sharing ratio of remaining partners.

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 81 | Page 101
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