Question

Babita, Chetan and David are partners in a firm sharing profits in the ratio of 2 : 1 : 1 respectively. Firm closes its accounts on 31st March every year. Chetan died on 30th September, 2012. There was a balance of ₹ 1,25,000 in Chetan’s Capital Account in the beginning of the year. In the event of 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 executor of deceased partner shall be paid ₹ 24,000 for his share of goodwill.
(c) His share of Reserve Fund of ₹ 12,000, shall be paid to his executor.
(d) His 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 ₹ 4,00,000. The sales from 1st April, 2012 to 30th September, 2012 were ₹ 1,20,000. The profit of the firm for the year ending 31st March, 2012 was ₹ 2,00,000.
Prepare Chetan’s Capital Account to be presented to his executor.

Answer 1

Explanation:

Working Notes:

1. Chetan's Goodwill =  Rs.24,000

Chetan's share of goodwill is to be distributed between Babita and David in their 2: 1 (Gaining Ratio).

Babita's = $24,000 \times \frac{2}{3}=16,000$

David's = $24,000 \times \frac{1}{3}=8,000$

2. Calculation of Profit and Loss Suspense

Sales in the year (2011-12) = 4,00,000

Profit of the year (2011-12) = $4,00,000 \times 50 \% (of Sales) =2,00,000$

Thus, Profit for the Period $( 1^{\text {st }} April to 30^{\text {th }} September)$= 50% of Sale.

Profit to be divided = $1,20,000 \times 50 \%=\mathrm{Rs} .60,000$

Chetan's profit = $60,000 \times \frac{1}{4}=15,000$