9 A, B and C were partners in a firm sharing profits in the ratio of 2:1:1 Their Balance - Accountancy - Reconstitution- Retirement/Death of a Partner

Question

9 A, B and C were partners in a firm sharing profits in the ratio
of 2:1:1 Their
Balance Sheet as on 31 3 2010 was as follows
Liabilities
Amount
Rs Assets
Amount
Rs
Capital accounts: Furniture 9,000
A 10,000 Stock 4,000
B 5,000 Debtors 6,000
C 5,000 20,000 Bills Receivable 2,000
General Reserve 3,200 Cash at Bank 5,000
Creditors 3,000
26,200
Cash in hand 200
26,200
On 30 6 2010 C died Under the provisions of partnership deed
the
executors of a deceased partner were entitled to the following:
(i) Amount standing to the credit of partners capital account
(ii) Interest on Capital @ 5% p a
(iii) Share of goodwill on the basis of two years purchase of the
average
profits of last three years
(iv) Share of profit in the year of his death, till the date of his
death on the
basis of the last year?s profit
The profits of the firm during the previous three years were as
follows:
Year Profit
Rs
2007-2008 5,000
2008-2009 9,000
2009-2010 7,000
C?s executors were paid Rs 800 on 1 7 2010 and the balance in three
equal
instalments of equal intervals of 6 months starting from 31 12 2010
with
interest @ 10% per annum
Pass necessary journal entries, at the time of C?s death, prepare
C?s Capital
Account and C?s Executor?s Account upto 31 12 2010

Neha Arora · Accepted Answer

Dear Student,

I am providing you with the Deceased Partner's Capital A/c &
Executor's A/c With these accounts, kindly try to pass the journal
entries at your end and if you still face any difficulty then do
get back to us for help

C’s Capital
Account

Dr

Cr

Particulars
Amount
Rs
Particulars

Amount
Rs

Cash A/c
800
Balance
b/d
5,000

C’s Executor’s
A/c
9,000
General Reserve
A/c
800

A’s Capital
A/c

2,333

B’s Capital
A/c

1,167

P&L Suspense
A/c
437
50

Interest on Capital
A/c
62
50

9,800

C’s
Executor’s Account

Dr

Cr

Date
Particulars
Amount
Rs

Date
Particulars

Amount
Rs

2010-11

Dec
31
Cash A/c
3,450
June 30
C’s Capital
A/c
9,000

Mar
31
Balance c/d
6,150
Dec 31
Interest
A/c

450

Mar 31
Interest
A/c

150

9,600

Working Notes

Calculation of Goodwill

Average Profit=5,000+9,000+7,0003=7,000Goodwill=7,000×2=14,000C's share in goodwill=14,000×14=3,500 (to be borne in 2:1 by A and B)

Calculation of Profit

Profit=7,000×14×312=437 50
Interest on Capital

Interest=5,000×5100×312=62 50

Calculation of Interest

Interest as on Dec 31=9,000×10100×612=450Interest as on Mar 31=6,000×10100×312=150

C’s Capital Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Cash A/c	800	Balance b/d	5,000
C’s Executor’s A/c	9,000	General Reserve A/c	800
		A’s Capital A/c	2,333
		B’s Capital A/c	1,167
		P&L Suspense A/c	437.50
		Interest on Capital A/c	62.50

	9,800		9,800

C’s Executor’s Account
Dr.						Cr.
Date	Particulars	Amount Rs	Date	Particulars	Amount Rs
2010-11			2010-11
Dec 31	Cash A/c	3,450	June 30	C’s Capital A/c	9,000
Mar 31	Balance c/d	6,150	Dec 31	Interest A/c	450
			Mar 31	Interest A/c	150
		9,600			9,600