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Question 73 Chapter 6 of +2-A
73. A, B and C are partners in a firm sharing profits in the proportion of 3 : 2 : 1. Their Balance Sheet as at 31st March, 2018 stood as follows:
| Liabilities | Amount | Assets | Amount | |
| Sundry Creditors | 2,70,000 | Cash in Hand | 42,500 | |
| General Reserve | 1,20,000 | Cash at Bank | 2,14,500 | |
| Capital A/cs: | Debtors | 1,63,000 | ||
| A | 2,00,000 | Stock | 17,500 | |
| B | 1,20,000 | Investment | 1,32,500 | |
| C | 80,000 | 4,00,000 | Building | 2,10,000 |
| B's Loan | 10,000 | |||
| 7,90,000 | 7,90,000 |
B died on 30th June 2018 and according to the deed of the said partnership his executors are entitled to be paid as under:
a The capital to his credit at the time of his death and interest thereon @ 10% per annum.
b His proportionate share of General Reserve.
c His share of profit for the intervening period will be based on the sales during that period. Sales from 1st April 2018 to 30th June 2018 were as 12,00,000. The rate of profit during the past three years had been 10% on sales.
d Goodwill according to his share of profit to be calculated by taking twice the amount of profits of the last three years less 20%. The profit of the previous three years were: 1st Year: 82,000; 2nd year: 90,000; 3rd year 98,000.
e The investments were sold at par and his executors were paid out in full. Prepare B's Capital Account and his Executors' Account.
B’s Capital Account
| Particular |
Amount | Particular | Amount | ||
|---|---|---|---|---|---|
| To B’s Loan A/c | 10,000 | By Balance b/d | 1,20,000 | ||
| To B' Executor A/c | 3,37,000 | By Interest on Capital A/c | 3,000 | ||
| By General Reserve | 40,000 | ||||
| By Profit and Loss Suspense A/c | 40,000 | ||||
| By Goodwill A/c | 1,44,000 | ||||
| 3,47,000 | 3,47,000 | ||||
B’s Executor Account
| Particular |
Amount | Particular | Amount | ||
|---|---|---|---|---|---|
| To Bank A/c | 3,37,000 | By B’s Capital A/c | 3,37,000 | ||
| 3,37,000 | 3,37,000 | ||||
Working Notes:
Calculation of Interest on Capital
Opening Capital = Rs 1,20,000
| Interest on capital | = | 1,20,000 | X | 10 | X | 3 |
| 100 | 12 | |||||
| = | Rs 3,000 |
| B’s profit Share | = | Previses Year’s Profit | X | Sale till death X B’s Profit share |
| Previses Year’s sale |
Previses Year’s Sale = Rs 98,000
| Rate of Profit to Sale | = | Previses Year’s Profit | X | 100 |
| Previses Year’s sale | ||||
| 10 | = | 98,000 | X | 100 |
| Previses Year’s sale |
Previses Year’s Sale = Rs 9,80,000
Sale till death = Rs 12,00,000
| B’s profit Share | = | 98,000 | X | 12,00,000 | X | 2 |
| 9,80,000 | 6 | |||||
| B’s profit Share | = | Rs 40,000 |
Calculation of share of goodwill
| Average Profit | = | 82,,000 + 90,000 + 98,000 |
| 3 | ||
| = | Rs 90,000 |
Average Profit (less 20%) = Rs 72,000
Goodwill = 72,000 X 2 = Rs 1,44,000
B’s Share of goodwill = Rs 1,44,000
T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
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.
This guide covers "Q.No.73 | Chapter 6 – Retirement/Death of a Partner | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1.
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