Question 72 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 72 Chapter 6 of +2-A

Question 72 Chapter 6 of +2-A

72. Kavita, Leena and Monica are partners in a firm sharing profits in the ratio of 1: 1 : 3 respectively. Their Capital Accounts showed the following balances on 31st March 2012: Kavita 70,000; Leena 65,000 and Monica 2,10,000. Firm closes its accounts every year on 31st March. Kavita died on 30th September 2012. In the event of the death of any partner, the Partnership Deed provides for the following:
a Interest on capital will be calculated at the rate of 6% p.a.
b The deceased partner’s share in the goodwill of the firm will be calculated on the basis of 2 years’ purchase of the average profit of the last three years. The profits of the firm for the last three years were 90,000; 1,00,000 and 1,10,000 respectively.
c Her share in the Reserve Fund of the firm will be paid. The Reserve Fund of the firm was 60,000 at the time of Kavita’s death. d Her share of profit till the date of death will be calculated on the basis of sales. It is also specified that the sales during the year 2011-12 were 20,00,000. The sales from 1st April 2012 to 30th September 2012 were 4,00,000.
The profit of the firm for the year ending 31st March 2012 was 2,00,000. Prepare Kavita’s Capital Account to be presented to his legal representative.

 

 

The solution of Question 72 Chapter 6 of +2-A: –

 

A’s Capital Account
Particular
Amount Particular Amount
To Kavita’s Executor’s A/c 1,32,100 By Capital 70,000
    By Interest on Capital A/c 2,100
    By Leena’s Capital A/c* 10,000
      By Monica’s Capital A/c*   30,000
      By Reserve Fund   12,000
      By P & L Suspense A/c**   8,000
    1,32,100     1,32,100

 

 

Working Notes:

Calculation of Goodwill

On the basis of 2 years purchase of average 3 years profit

Average Profit = Sum of Profits
No. of year
     
  = 90,000 + 1,00,000 + 1,10,000
  3
     
  = Rs 1,00,000

Goodwill = Average profit X 2= Rs 1,00,000 X 2 =Rs 2,00,000


Kavita’s Share of goodwill = 2,00,000 X 1
5
         
  = Rs 40,000    

This share will be contributed by the remaining partner in their gaining ratio
Gaining Ratio of Leena and Monica = 1:3

 

Leena’s Share of contribution = 40,000 X 1
4
         
  = Rs 10,000    

 

Monica’s Share of contribution = 40,000 X 3
4
         
  = Rs 30,000    

 

** Sales in the year 2011-12 = 20,00,000
Profit for year 2011-12 = 2,00,000 = 10% of Sales
Therefore, Profit for the Period 1 Apr – 30 th Sep = 10% of Sales of the same period
Share of Profit to be divided = 10% of Rs 4,00,000 = Rs 40,000
Kavita’s Share of Profit = 1/5 th of Rs 40,000 = Rs 8,000

 

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 72 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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