RETIREMENT OR DEATH OF A PARTNER
Akhil, Nikhil and sunil were partners sharing profit and losses equally. Balance sheet as on 31st Mar 2011.
| Liablities | Rs | Assets | Rs. |
| Creditors | 40000 | Cash | 85000 |
| Reserves | 45000 | Debtores | 80000 |
| Capital | Stock | 35000 | |
| Akhil - 195000 | Machinery | 80000 | |
| Nikhil - 120000 | Buildings | 200000 | |
| Sunil - 80000 | 395000 | ||
| 480000 | 480000 |
Sunil died on 1st August, 2011. The partnership deed provided that the executor of a deceased partner was entitled to :
(1) Balance of partner's capital account and his share Of the accumulated reserves.
(ii) Share of goodwill calculated on the basis of three times the average profits of the last four years.
(iii) Share of profit 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.
(iv) Interest on deceased's capital @ 6% per annum.
Rs. 50,000 to be paid to deceased's executor immediately and the balance to be kept in his loan account. Profits and losses for the preceding years ending 31st March Were :
2008 - 80.000 profit
2009 — 100000 loss
2010 — 1,20,000 profit
2011 — 1,80,000 profit
Pass the necessary journal entries and prepare Sunil 's Capital Account and Sunil's
Executor's Account.
[Ans. Balance of Sunil Executor's Account Rs. 136600]
Dear Student
From the above ledger accounts you can easily prepare journal entries , Please get back in case you have any doubt .
Regards
| Sunil's Capital A/c | |||||
| Date | Particulars | Amount (in Rs) | Date | Particulars | Amount (in Rs) |
| Bal B/d | 80,000 | ||||
| Akhil's Capital A/c | 35,000 | ||||
| Nikhil's Capital A/c | 35,000 | ||||
| Profit and Loss suspense A/c | 20,000 | ||||
| Sunil's Executors A/c | 186,600 | Reserves | 15,000 | ||
| Interest on Capital (80,000 x 6% x 4/12) | 1,600 | ||||
| 186,600 | 186,600 | ||||
| Calculation of Goodwill | ||
| Average Profit of Last 4 Years | 70,000 | |
| Goodwill as sum of 3 Years profit | 210,000 | |
| Share of Sunil | (2,10,000 x 1/3) | 70,000 |
| Gaining Ratio | 1:1 | |
| Goodwill Adjustment for Sunil | ||
| Akhil's Capital A/c | (70,000 x 1/2) | 35,000 |
| Nikhil's Capital A/c | (70,000 x 1/2) | 35,000 |
| Profit till Death | ||
| Profit of Preceeding year | 180,000 | |
| Profit of 3 months on the basis of above profit | (1,80,000 x 4/12) | 60,000 |
| Sunil's Share | (60,000 x 1/3) | 20,000 |
| Sunil's Executors A/c | |||||
| Date | Particulars | Amount (in Rs) | Date | Particulars | Amount (in Rs) |
| Bank A/c | 50,000 | Sunil's Capital A/c | 186,600 | ||
| Bal C/d | 136,600 | ||||
| 186,600 | 186,600 | ||||
From the above ledger accounts you can easily prepare journal entries , Please get back in case you have any doubt .
Regards