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Question 67 Chapter 6 of +2-A
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67. Vikas, Gagan and Momita were partners in a firm sharing profits in the ratio of 2 : 2: 1. The firm closes its books on 31st March every year. On 30th September 2014 Momita died. According to the provisions of Partnership Deed the legal representatives of a deceased partner are entitled to the following in the event of his/her death:
a Capital as per the last Balance Sheet.
b Interest on capital at 6% per annum till the date of her death.
c Her share of profit to the date of death calculated on the basis of the average profit of the last four years.
d Her share of goodwill to be determined on the basis of three years’ purchase of the average profit of the last four years. The profits for the last four years were:
| Year | 2010-11 | 2011-12 | 2012-13 | 2013-14 |
| Profit | 30,000 | 50,000 | 40,000 | 60,000 |
The balance in Momita’s Capital Account on 31st March 2014 was 60,000 and she had withdrawn 10,000 till the date of her death. Interest on her drawings was 300.
Prepare Momita’s Capital Account to be presented to her executors
The solution of Question 67 Chapter 6 of +2-A: –
| Momita’s Capital Account | |||||
| Particular | Amount | Particular | Amount | ||
| To Drawings A/c | 10,000 | By Balance b/d | 60,000 | ||
| To Interest on Drawings A/c | 300 | By Interest on Capital A/c | 1,800 | ||
| To Executor’s A/c | 83,000 | By Vikas’s Capital A/c | 13,500 | ||
| By Gagan’s Capital A/c | 13,500 | ||||
| By Profit and Loss Suspense A/c | 4,500 | ||||
| 93,300 | 93,300 | ||||
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Working Notes:
Calculation of Interest on Capital
| Interest on Capital | = | 60,000 | X | 6 | X | 6 |
| 100 | 12 | |||||
| = | Rs 1,800 |
| Average Profit | = | Profit of last 4 year |
| 4 | ||
| = | 30,000 + 50,000 + 60,000 + 40,000 | |
| 4 | ||
| = | Rs 45,000 |
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Calculation of P’s Share of Profit
Profit for last year = Rs 30,000
| Share of Momita in profit | = | 45,000 | X | 1 | X | 6 |
| 5 | 12 | |||||
| = | Rs 4,500 |
Adjustment of Goodwill
Average Profit = 45,000
Goodwill of the firm = Average Profit X Number of Purchased year
| = | 45,000 | X | 3 | |
| = | Rs 1,35,000 |
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| Momita’s of Goodwill | = | 1,35,000 | X | 1 |
| 5 | ||||
| = | Rs 27,000 |
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| Vikas and Gagan will pay | = | 27,000 | X | 1 |
| 2 | ||||
| = | Rs 13,500 |
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)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
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
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
