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Question 56 Chapter 6 of +2-Part-1
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56. (Journal Entries/Amount due to executors of deceased Partner) Following is the balance sheet of Black, Brown, and White as of 31st December 2018
| Liabilities | Rs. | Assets | Rs. |
| Capital A/c | Plant & Machinery | 10,000 | |
| Black | 10,000 | Stock | 4,000 |
| Brown | 5,000 | Sundry Debtors | 6,000 |
| White | 5,000 | Cash in hand | 200 |
| Sundry Creditors | 2,000 | Cash at bank | 5,000 |
| Reserve fund | 3,200 | ||
| 25,200 | 25,200 |
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White died on 31st March 2019. Under the terms of the partnership deed, the Executors of a deceased partner wore entitled:
- the amount standing to the credit of the partner’s capital account,
- share of goodwill on the basis of twice the average of the past three year’s profit; and
- share of profit from the closing of the last financial year to the death on the basis of the last years profits.
Profits for 2016, 2017, and 2018 were respectively. Rs. 6,000, Rs. 8,000 and Rs. 7,000.Profits were shared in the ratio of capitals.
Pass the necessary journal entries and show the amount due to the executors of White.
The solution of Question 56 Chapter 6 of +2 Part-1: –
| Journal |
|||||
| Date | Particulars |
L.F. | Debit | Credit | |
| a) | Reserve fund A/c | Dr. | 3,200 | ||
| To Black’s capital A/c | 1,600 | ||||
| To Brown’s capital A/c | 800 | ||||
| To White’s capital A/c | 800 | ||||
| (Being reserve fund transferred to the capital A/c in old profit sharing ratio ) | |||||
| b) | Black’s capital A/c | Dr. | 1,167 | ||
| Brown’s capital A/c | Dr. | 2,333 | |||
| To White’s capital A/c | 3,500 | ||||
| (Being goodwill A/c raised with the share of deceased partner ) | |||||
| c) | Profit & loss suspense A/c | Dr. | 438 | ||
| To White’s capital A/c | 438 | ||||
| (Being white’s share of profit to the date of death ) | |||||
| d) | White’s capital A/c | Dr. | 9,738 | ||
| To Executor’s of White loan A/c | 9,738 | ||||
| (Being amount due to white transferred to executors A/c ) | |||||
| White’s Capital A/c |
|||||
| Particulars |
Amount | Particulars | Amount | ||
| To executor’s loan A/c | 9,738 | By balance b/d | 5,000 | ||
| By reserve fund | 800 | ||||
| By goodwill A/c | 3,500 | ||||
| By profit & loss A/c | 438 | ||||
| 9,738 | 9,738 | ||||
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WORKING NOTES :
Valuation of goodwill
| Year | Profit |
| 2016 | 6,000 |
| 2017 | 8,000 |
| 2018 | 7,000 |
| Total | 21,000 |
| Average profit | = | 21,000 |
| 3 | ||
| = | 7,000 |
Value of goodwill at 2 year’s purchase = 2 X 7,000 = Rs. 14,000
| White’s share in goodwill | = | 1 | x | 14,000 |
| 3 | ||||
| = | Rs 3,500 |
Calculation of share of profit of white till date of death
Profit average = Rs. 7,000
| Profit for 3 months | = | 3 | x | 7,000 |
| 12 | ||||
| = | Rs 1,750 |
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| White’s share of profit | = | 1 | x | 1,750 |
| 4 | ||||
| = | Rs 438 |
Comment if you have any questions.
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Also, Check out the solved question of previous Chapters: –
Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution
- Chapter No. 1 – Accounting Not for Profit Organisations
- Chapter No. 2 – Partnership Accounts – I (Introduction)
- Chapter No. 3 – Partnership Accounts – II (Goodwill: Nature and Valuation)
- Chapter No. 4 – Partnership Accounts – III (Reconstitution of Partnership)
- Chapter No. 5 – Partnership Accounts – IV (Admission of A Partner)
- Chapter No. 6 – Partnership Accounts – V (Retirement and Death of A Partner)
- Chapter No. 7 – Partnership Accounts – VI (Dissolution of Partnership Firm)
- Chapter No. 8 – Company Accounts (Share Capital)
- Chapter No. 9 – Company Accounts (Issue of Debentures)
- Chapter No. 10 – Company Accounts (Redemption of Debentures)
Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis- Comparative and Common Size
- Chapter No. 4 – Ratio Analysis
- Chapter No. 5 – Cash Flow Statement
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
