Question 65 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 65 Chapter 6 of +2-A

Question 65 Chapter 6 of +2-A

65. X and Y are partners. The Partnership Deed provides inter alia: a That the Accounts be balanced on 31st March every year. b That the profits be divided as: X one-half, Y one-third and carried to a Reserve one-sixth. c That in the event of the death of a partner, his Executors be entitled to be paid: 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.

BALANCE SHEET as at 31st March 2019
Liabilities   Amount  Assets Amount
Capital A/cs:     Sundry Assets 21,000
X 9,000      
Y 6,000 15,000    
Reserve   3,000    
Creditors   3,000    
    21,000   21,000

Profits for three years were: 2016-17 − 4,200; 2017-18 − 3,900; 2018-19 − 4,500. Y died on 1st August, 2019. Prepare necessary accounts

 

The solution of Question 65 Chapter 6 of +2-A: –

 

Y’s Capital Account
Particular
Amount Particular Amount
To Y’s Executor’s 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
           
    12,800     12,800

 

 

Working Notes:
Y’s Share of Reserve

  = 3,000 X 2
5
         
  = Rs 1,200    

 

Calculation Y’s Share of Profit

Average Profit = Profit of last 3 year
3
     
  = 4,200 + 3,900 + 4,500
  3
     
  = Rs 4,200

 

Y’s Share of Profit (from April 01, 2019, to August 01, 2019 = 4,200 X 2 X 4
5 12
             
  = Rs 560        

Calculation of Y’s Share of Goodwill

Y’s share of Goodwill = Y’s Profit Share in last three year
Profit for last three years = 4,200 + 3,900 + 4,500 = Rs 12,600

Y’s Share of Goodwill = 12,600 X 2
5
         
  = Rs 5,040    

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

  • Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
  • Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
  • Chapter No. 3 – Goodwill: Nature and Valuation
  • Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
  • Chapter No. 5 – Admission of a Partner
  • Chapter No. 6 – Retirement/Death of a Partner
  • Chapter No. 7 – Dissolution of a Partnership Firm

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

  • Chapter No. 1 – Financial Statements of a Company
  • Chapter No. 2 – Financial Statement Analysis 
  • Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
  • Chapter No. 4 – Accounting Ratios
  • Chapter No. 5 – Cash Flow Statement

 

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2 Book 1 min - Question 65 Chapter 6 of +2-A - T.S. Grewal 12 Class Part - A Vol. 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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