T.S. Grewal Class 12 Chapter 6 Q.28 - Death of a Partner

Question 28

X and Y are partners. The Partnership Deed provides: (a) accounts be balanced on 31st March every year; (b) profits be divided as X one-half, Y one-third, and one-sixth carried to Reserve; (c) in the event of the death of a partner, his Executors be entitled to: (i) the capital to his credit till the date of death; (ii) his proportion of profits till the date of death based on the average profits of the last three completed years; (iii) by way of goodwill, his proportion of the total profits for the three preceding years. The Balance Sheet as at 31st March, 2024 showed Capitals – X ₹9,000, Y ₹6,000; Reserve ₹3,000, Creditors ₹3,000; Sundry Assets ₹21,000. Profits for three years were: 2022 – ₹4,200; 2023 – ₹3,900; 2024 – ₹4,500. Y died on 1st August, 2024. Prepare the necessary accounts.

Solution

Y’S CAPITAL ACCOUNT

Particulars	₹	Particulars	₹
To Y’s Executors’ A/c	12,800	By Balance b/d	6,000
		By X’s Capital A/c (Reserve)	1,200
		By X’s Capital A/c (Goodwill)	5,040
		By X’s Capital A/c (Profit)	560
Total	12,800	Total	12,800

Working Notes: Old ratio (X : Y) = 1/2 : 1/3 = 3 : 2. Y’s share of Reserve = 3,000 × 2/5 = ₹1,200. Average profit = (4,200 + 3,900 + 4,500) / 3 = ₹4,200; Y’s share of profit (1st April to 1st August, 2024, i.e. 4 months) = 4,200 × 2/5 × 4/12 = ₹560. Y’s share of goodwill = total profit of last three years (4,200 + 3,900 + 4,500 = 12,600) × 2/5 = ₹5,040.