he Balance Sheet of A, B and C who were sharing profits in the ratio of
3 : 3 : 4 as at 31
st March, 2019 was as follows :
Balance Sheet of A, B and C as at 31st March, 2019
Liabilities Amount
<
Assets Amount
<
General Reserve 40,000 Cash 4,000
Bills Payable 15,000 Stock 43,000
Loan from Bank 30,000 Investments 70,000
Capitals : Land and Buildings 1,58,000
A 60,000
B 90,000
C 40,000 1,90,000
2,75,000 2,75,000
A died on 1
st October, 2019. The partnership deed provided for the
following on the death of a partner :
(i) Goodwill of the firm be valued at two years’ purchase of average
profits for the last three years.
(ii) The profit for the year ending 31
st March, 2019 was < 50,000.
(iii) Interest on capital was to be provided @ 6% p.a.
(iv) The average profits of the last three years were < 35,000.
Prepare A’s Capital Account to be rendered to his executors.
Answers
To find:
A’s Capital Account
Dr. Cr. Particular. rs. particular. rs.
To executors By Bal b/d. 60,000
A/c. 99,550 By B's cap. 13,500
By C's cap. 18,000
By p&l
suspense 6,250
By int. on cap. 1800
99,550. 99,550
Working notes:
(i) Calculation Goodwill of share of A's :
The average profit of last three year profit = 35,000
Goodwill = average profit × no of year purchase goodwill
= 35,000 × 3 = 1,05,000
(ii) A's share on Goodwill = 1,05,000 × 3/10 = 31,500
Gaining ratio of B and C = 3:4
B's contribution = 31,500 × 3/7 =13,500
C's contribution = 31,500 × 4/7 = 18,000
(iii) interest on capital of A's share:
=60,000 × 6/12 ×6%
=1800
(iv) profit sharing till death:
=50,000 × 6/12 ×3/10
= 6,250
Solution:
Due to A's death executor account balance transfer amount is 99,550.