Question 68 Chapter 6 of +2-A
68. On 31st March 2014, the Balance Sheet of Pooja, Qureshi and Ross, who were partners in a firm was as under:
| Liabilities | Amount | Assets | Amount | |
| Sundry Creditors | 2,50,000 | Building | 2,60,000 | |
| Reserve Fund | 2,00,000 | Investment | 1,10,000 | |
| Capital A/c | Qureshi’s Loan | 1,00,000 | ||
| Pooja | 1,50,000 | Debtors | 1,50,000 | |
| Qireahi | 1,00,000 | Stock | 1,20,000 | |
| Ross | 1,00,000 | 3,50,000 | Cash | 60,000 |
| 8,00,000 | 8,00,000 |
Qureshi died on 1st July 2014. The profit-sharing ratio of the partners was 2 : 1: 1. On the death of a partner, the partnership deed provided for the following:
i His share in the profits of the firm till the date of his death will be calculated on the basis of average profits of the last three completed years.
ii Goodwill of the firm will be calculated on the basis of the total profit for the last two years.
iii Interest on loan given by the firm to a partner will be charged at the rate of 6% p.a. or 4,000, whichever is more.
iv Profits for the last three years were 45,000; 48,000 and 33,000.
Prepare Qureshi's Capital Account to be rendered to his executors
Qureshi’s Capital A/c
| Particular |
Amount | Particular | Amount | ||
|---|---|---|---|---|---|
| To Drawings A/c | 1,04,000 | By Balance b/d | 1,00,000 | ||
| To Executor’s A/c | 68,875 | By Pooja’s Capital A/c WN1 | 13,500 | ||
| By Ross’s Capital A/c WN1 | 6,750 | ||||
| By Profit & Loss Suspense A/c WN2 | 2,625 | ||||
| By Reserve Fund A/c 2,00,000 × 1/4 | 50,000 | ||||
| 1,72,875 | 1,72,875 | ||||
Working Notes:
Calculation of Qureshi’s Share of Goodwill
Goodwill = 48,000 + 33,000 = 81,000
Qureshi’s Share of Goodwill = 81,000 × 1/4 = 20,250
Gaining Ratio = Pooja : Ross = 2 : 1
| Amount debited to Pooja’s Capital A/c | = | 20,250 | X | 2 |
| 3 | ||||
| = | Rs 13,500 |
| Amount debited to Ross’s Capital A/c | = | 20,250 | X | 1 |
| 3 | ||||
| = | Rs 6,750 |
Calculation of Qureshi’’s Share of Loss till the date of his death
Average Profit of the last three years = 45,000 + 48,000 + 33,000/3 = 42,000
Qureshi’s share of loss till the date of death = Previous year’s loss × Qureshi’s Share of Loss × Months till the date of his death/12
| = | 42,000 | X | 1 | X | 3 |
| 4 | 12 | ||||
| = | Rs 2,625 |
Calculation of Amount due on account of Loan given to Qureshi
Loan given to Qureshi by a firm = 1,00,000
| Amount of interest till 1st July, 2014 | = | 1,00,000 | X | 6 | X | 3 |
| 100 | 12 | |||||
| = | Rs 1,500 |
Adjustment of Goodwill
| Total Amount due to firm on 1st July | = | Loan amount | + | Amount of Interest |
| = | 1,00,000 | + | 4,000 | |
| = | Rs 1,04,000 |
T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)
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Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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