Question 73 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 73 Chapter 6 of +2-A

Question 73 Chapter 6 of +2-A

73. A, B and C are partners in a firm sharing profits in the proportion of 3 : 2 : 1. Their Balance Sheet as at 31st March, 2018 stood as follows:

Liabilities   Amount  Assets Amount
Sundry Creditors   2,70,000 Cash in Hand 42,500
General Reserve   1,20,000 Cash at Bank 2,14,500
Capital A/cs:     Debtors  1,63,000
A 2,00,000   Stock 17,500
B 1,20,000   Investment  1,32,500
C 80,000 4,00,000 Building 2,10,000
      B’s Loan 10,000
    7,90,000   7,90,000

B died on 30th June 2018 and according to the deed of the said partnership his executors are entitled to be paid as under:
a The capital to his credit at the time of his death and interest thereon @ 10% per annum.
b His proportionate share of General Reserve.
c His share of profit for the intervening period will be based on the sales during that period. Sales from 1st April 2018 to 30th June 2018 were as 12,00,000. The rate of profit during the past three years had been 10% on sales.
d Goodwill according to his share of profit to be calculated by taking twice the amount of profits of the last three years less 20%. The profit of the previous three years were: 1st Year: 82,000; 2nd year: 90,000; 3rd year 98,000.
e The investments were sold at par and his executors were paid out in full. Prepare B’s Capital Account and his Executors’ Account.

The solution of Question 73 Chapter 6 of +2-A: –

 

B’s Capital Account
Particular
Amount Particular Amount
To B’s Loan A/c 10,000 By Balance b/d 1,20,000
To B’ Executor A/c 3,37,000 By Interest on Capital A/c 3,000
    By General Reserve 40,000
      By Profit and Loss Suspense A/c   40,000
      By Goodwill A/c   1,44,000
    3,47,000     3,47,000

 

B’s Executor Account
Particular
Amount Particular Amount
To Bank A/c 3,37,000 By B’s Capital A/c 3,37,000
           
    3,37,000     3,37,000

Working Notes:

Calculation of Interest on Capital

Opening Capital = Rs 1,20,000

Interest on capital = 1,20,000 X 10 X 3
100 12
             
  = Rs 3,000        

 

B’s profit Share = Previses Year’s Profit X Sale till death X B’s Profit share
Previses Year’s sale

Previses Year’s Sale = Rs 98,000

Rate of Profit to Sale = Previses Year’s Profit X 100
Previses Year’s sale
10 = 98,000 X 100
Previses Year’s sale

Previses Year’s Sale = Rs 9,80,000
Sale till death = Rs 12,00,000

B’s profit Share = 98,000 X 12,00,000 X 2
9,80,000 6
             
B’s profit Share = Rs 40,000        



Calculation of share of goodwill

Average Profit = 82,,000 + 90,000 + 98,000
3
     
  = Rs 90,000

Average Profit (less 20%) = Rs 72,000
Goodwill = 72,000 X 2 = Rs 1,44,000
B’s Share of goodwill = Rs 1,44,000

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 73 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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