T.S. Grewal Class 12 Chapter 6 Q.26 - Death of a Partner

Question 26

Iqbal and Kapoor are in partnership sharing profits and losses in the ratio of 3 : 2. Kapoor died three months after the date of the last Balance Sheet. According to the Partnership Deed, the legal heir is entitled to: (a) his capital as per the last Balance Sheet; (b) interest on the above capital @ 3% p.a. till the date of death; (c) his share of profits till the date of death, calculated on the basis of last year’s profit. His drawings are to bear interest at an average rate of 2% on the amount, irrespective of the period. The net profits for the last three years, after charging insurance premium, were ₹20,000, ₹25,000 and ₹30,000 respectively. Kapoor’s capital as per the Balance Sheet was ₹40,000, and his drawings till the date of death were ₹5,000. Draw up Kapoor’s Capital Account to be rendered to his representatives.

Solution

KAPOOR’S CAPITAL ACCOUNT

Particulars	₹	Particulars	₹
To Drawings A/c	5,000	By Balance b/d	40,000
To Interest on Drawings A/c	100	By Interest on Capital A/c	300
To Kapoor’s Executors’ A/c	38,200	By Profit & Loss Suspense A/c	3,000
Total	43,300	Total	43,300

Working Notes: Interest on Capital = 40,000 × 3/100 × 3/12 = ₹300. Kapoor’s share of profit (last year’s profit ₹30,000, for 3 months, in his share 2/5) = 30,000 × 3/12 × 2/5 = ₹3,000. Interest on Drawings = 5,000 × 2% = ₹100 (a flat rate, irrespective of period).