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Death of a Partner 5.5
Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars Albert Boris Cyril Particulars Albert Boris Cyril
` ` ` ` ` `
To Albert’s Capital A/c ... 8,000 4,000 By Balance b/d 50,000 50,000 50,000
(Goodwill) (WN 3) By Profit and Loss
To Albert’s Executors’ A/c 67,375 ... ... Suspense A/c 1,375 ... ...
(Transfer) —Share of Profit (WN 2)
To Balance c/d ... 44,167 47,083 By Interest on Capital A/c (WN 1) 750 ... ...
By Boris’s Capital A/c (WN 3) 8,000 ... ...
By Cyril’s Capital A/c (WN 3) 4,000 ... ...
By Revaluation A/c 3,250 2,167 1,083
—Gain
67,375 52,167 51,083 67,375 52,167 51,083

BALANCE SHEET
as at 1st July, 2018
Liabilities ` Assets `
Capital A/cs: Building 80,000
Boris 44,167 Machinery 25,000
Cyril 47,083 91,250 Stock 30,000
Albert’s Executors’ A/c 67,375 Debtors 15,000
Creditors 17,000 Less: Provision for Doubtful Debts 1,500 13,500
Bank 25,000
Profit and Loss Suspense A/c* 2,125
1,75,625 1,75,625

*Share of Profit + Interest on Capital = ` 1,375 + ` 750 = ` 2,125.
Working Notes:
1. Interest on Albert’s Capital for 3 months up to date of his death: ` 50,000 × 6/100 × 3/12 = ` 750.
2. Albert’s share of Profit up to the date of his death = ` 11,000 × 3/12 × 3/6 = ` 1,375.
3. Albert’s Share of Goodwill:
Average Profit of last 3 years = 1/3 × ` (11,000 + 15,000 + 10,000) = ` 12,000.
Albert’s Share of Average Profit = 3/6 × ` 12,000 = ` 6,000.
Value of his Share of Goodwill = 2 × ` 6,000 = ` 12,000.
Albert’s Share of Goodwill credited to his Capital Account which is to be contributed by Boris and Cyril
in their Gaining Ratio. (As the profit-sharing ratio of Boris and Cyril remains the same in the new firm,
gaining ratio is the new ratio.)

Illustration 3.
Bina and Anita are partners.
Their partnership agreement provides for the following:
(i) Accounts are to be balanced on 31st December each year.
(ii) Profits are to be divided as follows:
Bina: one-half; Anita: one-third and carried to Reserve: one-sixth.