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Question 77 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 77 Chapter 6 of +2-A
Question No.77 Chapter No.6 - T.S. Grewal +2 Book 2019-Solution

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Question 77 Chapter 6 of +2-A

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77. Akhil, Nikhil and Sunil were partners sharing profits and losses equally. Following was their Balance Sheet as at 31st March, 2018:

Liabilities Amount AssetsAmount
Trade Creditor 40,000Building2,00,000
General Reserve 45,000Plant and Machinery80,000
Capital A/cs:  Stock35,000
Akhil1,95,000 Debtors80,000
Nikhil1,20,000 Cash at Bank85,000
Sunil80,0003,95,000  
  4,80,000 4,80,000

Sunil died on 1st August 2018. The Partnership Deed provided that the executor of a deceased partner was entitled to:
a Balance of Partners’ Capital Account and his share of the accumulated reserve.
b Share of profits from the closure of the last accounting year till the date of death on the basis of the profit of the preceding completed year before death.
c Share of goodwill calculated on the basis of three times the average profit of the last four years.
d Interest on deceased partner’s capital @ 6% p.a.
e 50,000 to be paid to deceased’s executor immediately and the balance to remain in his Loan Account. Profits and Losses for the preceding years were: 2014-15 − 80,000 Profit; 2015-16 − 1,00,000 Loss; 2016-17 − 1,20,000 Profit; 2017-18 − 1,80,000 Profit.
Pass necessary Journal entries and prepare Sunil’s Capital Account and Sunil’s Executor Account.

 

The solution of Question 77 Chapter 6 of +2-A: –

 

DateParticulars
L.F.DebitCredit
 General Reserve A/cDr. 45,000 
 To Akhil’s Capital A/c   15,000
 To Nikhil’s Capital A/c   15,000
 To Sunil’s Capital A/c   15,000
 (Being General Reserve distributed among partners in their old ratio)   
 Akhil’s Capital A/cDr. 35,000 
 Nikhil’s Capital A/cDr. 35,000 
 To Sunil’s Capital A/c   70,000
 (Being Sunil’s share of goodwill adjusted)    
 Interest on Capital A/cDr. 1,600 
 To Sunil’s Capital A/c   1,600
 (Being Interest allowed on Sunil’s Capital)    
 Profit and Loss Suspense A/cDr. 20,000 
 To Sunil’s Capital A/c   20,000
 (Being Sunil’s profit share transferred to his capital account)    
 Sunil’s Capital A/cDr. 1,86,600 
 To Sunil’s Executor’s A/c   1,86,600
 (Being Amount due to Sunil after all adjustments transferred to his Executor’s Account)    
 Sunil’s Executor’s A/cDr. 50,000 
 To Bank A/c   50,000
 (Being Amount paid to Sunil’s Executor )    

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Sunil’s Capital Account
ParticularAmountParticularAmount
To Executor’s A/c1,86,600By Balance b/d80,000
  By Interest on Capital A/c1,600
  By General Reserve 15,000
  By Profit and Loss Suspense A/c 20,000
  By Akhil’s Capital A/c Goodwill 35,000
  By Nikhil’s Capital A/c Goodwill 35,000
 1,86,600  1,86,600



Sunil’s Executor Account
ParticularAmountParticularAmount
To Bank A/c1,86,600By Sunil’s Capital A/c1,86,600
     
 1,26,000  1,26,000

 

 

Working Notes:

Calculation of Sunil’s Share of Profit

Profit for 2017-18 = Rs 1,80,000

Sunil’s share of Profit=1,80,000X1X4
312
       
 =Rs 20,000    

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Calculation of Goodwill

Goodwill = Average Profit × Number of Year’s Purchase

Average Profit=(80,000 -1,00,000 + 1,20,000 + 1,80,000 )
4
   
 =Rs 70,000

∴ Goodwill = Average Profit × Number of Years’ Purchase
= 70,000 × 3 = Rs 2,10,000

Adjustment of Goodwill

Old Ratio = 1 : 1 : 1
Sunil died
∴ New Ratio = 1 : 1
Gaining Ratio = 1 : 1

Sunil’s Share in Goodwill=2,10,000X2
10
     
 =Rs 70,000  

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This share of goodwill is to be distributed between Akhil and Nikhil in their gaining ratio i.e. 1 : 1


Akhil’s Share in Goodwill=70,000X1
2
     
 =Rs 35,000  

 

Nikhil’s Share in Goodwill=70,000X1
2
     
 =Rs 35,000  

 

Calculation of Interest on Sunil’s Capital

Sunil’s Capital Balance = Rs 80,000

Interest on Capital=80,000X6X4
10012
       
 =Rs 1,600    

 

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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

 

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

+2 Book 1-min
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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