Page 111 - ISCDEBK-12

Death of a Partner 5.9
(iii) For the purpose of calculating C’s share in the profits of 2018–19, the profits in 2018–19
should be taken to have accrued on the same scale as in 2017–18.
(iv) A sum of ` 21,000 to be paid immediately to the executors of C and the balance to
be paid in four equal half-yearly instalments together with interest @ 10% p.a.
Prepare C’s Capital Account and C’s Executors’ Account for 2018–19.

Note: Firm closes its accounts on 31st March every year.
Solution:
Dr. C’S CAPITAL ACCOUNT Cr.
Date Particulars ` Date Particulars `

2018 2018
Aug. 1 To Goodwill A/c 5,000 April 1 By Balance b/d 75,000
Aug. 1 To C’s Executors’ A/c 1,21,000 Aug. 1 By Revaluation A/c (Profit) 5,000
(Balancing Figure) By A’s Capital A/c (Goodwill) (WN 1) 21,875
By B’s Capital A/c (Goodwill) (WN 1) 13,125
By Profit and Loss Suspense A/c (WN 2) 5,000
By Workmen Compensation
Reserve A/c 2,000
By Reserve Fund A/c 4,000
1,26,000 1,26,000

Dr. C’S EXECUTORS’ ACCOUNT Cr.
Date Particulars ` Date Particulars `

2018 2018
Aug. 1 To Bank A/c 21,000 Aug. 1 By C’s Capital A/c 1,21,000
2019 2019
Jan. 31 To Bank A/c 30,000 Jan. 31 By Interest A/c 5,000
(` 25,000 + ` 5,000) (` 1,00,000 × 10/100 × 6/12)
Jan. 31 To Balance c/d 75,000
1,26,000 1,26,000
2019 2019
March 31 To Balance c/d 76,250 Feb. 1 By Balance b/d 75,000
March 31 By Interest A/c 1,250
(` 75,000 × 10/100 × 2/12)
76,250 76,250

Working Notes:
1. Calculation of Goodwill: `
(i) Total Profits for last 4 years (` 65,000 + ` 60,000 + ` 80,000 + ` 75,000) 2,80,000
(ii) Average Profit (` 2,80,000/4) 70,000
(iii) Goodwill (` 70,000 × 2½) 1,75,000
( ) C’s Share of Goodwill (` 1,75,000 × 2/10) 35,000
C's Share of Goodwill ` 35,000 will be adjusted between A and B in their Gaining Ratio, i.e., 5 : 3.
2. C’s Share of Profit up to the date of death = ` 75,000 × 4/12 × 2/10 = ` 5,000.