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

Question 6

X, Y and Z were partners in a firm sharing profits in 3 : 2 : 1. The firm closes its books on 31st March every year. Y died on 30th June, 2024. On Y’s death, goodwill of the firm was valued at ₹60,000. Y’s share of profit till the date of death was to be calculated on the basis of the previous year’s profit, which was ₹1,50,000. Pass the necessary Journal entries for goodwill and Y’s share of profit at the time of death.

Solution

JOURNAL

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
2024 Jun 30	X’s Capital A/c    Dr.		15,000
	Z’s Capital A/c    Dr.		5,000
	To Y’s Capital A/c			20,000
	(Y’s share of goodwill adjusted through X’s and Z’s Capital Accounts in gaining ratio 3 : 1)
Jun 30	Profit & Loss Suspense A/c    Dr.		12,500
	To Y’s Capital A/c			12,500
	(Y’s share of profit till death debited to Profit & Loss Suspense A/c)

Working Notes: Y’s share of goodwill = 60,000 × 2/6 = ₹20,000, borne by X and Z in their gaining ratio 3 : 1 (since new ratio = old ratio less Y): X pays 20,000 × 3/4 = ₹15,000; Z pays 20,000 × 1/4 = ₹5,000. Y’s share of profit (1st April, 2024 to 30th June, 2024, i.e. 3 months) = 1,50,000 × 2/6 × 3/12 = ₹12,500.