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5.12 Double Entry Book Keeping (Section A)—ISC XII

(iii) His share of profit up to the date of death on the average of last three years’ profit.
(iv) His share of any undistributed profits and losses as per last Balance Sheet.
(v) Interest on his Drawings up to the date of death will be charged @ 10% p.a.
Profits for the last three financial years were ` 65,000; ` 64,000 and ` 69,000. B’s drawings
up to the date of death amounting to ` 10,000. Ascertain the amount payable to the legal
representative of B (Goodwill excluded). (ISC 1996, Modified)
Solution: CALCULATION OF THE AMOUNT PAYABLE TO THE LEGAL REPRESENTATIVE OF B
Particulars `
Capital as per last Balance Sheet 15,000
Interest on Capital for 6 months @ 6% p.a. 450
Share of Profit for 6 months:
Average Profit: 1/3 × ` (65,000 + 64,000 + 69,000) = ` 66,000
Profit for 6 months: 1/2 × ` 66,000 = ` 33,000
B’s Share: 1/3 × ` 33,000 11,000
Share of General Reserve: 1/3 × ` 10,000 3,333
29,783
Less: Drawings 10,000
Interest on Drawings (` 10,000 × 10/100 × 3/12) 250 10,250
Total Amount Payable 19,533
Note: In the absence of actual dates of drawings, interest thereon has been calculated for the average period
of 3 months on the assumption that the drawings were made evenly during the period of 6 months.
Illustration 9.
Mandeep, Randeep and Sandeep are in partnership sharing profits equally. Sandeep died
on 30th June, 2018. Balance Sheet of the firm as at 31st March, 2018 was as follows:

Liabilities ` Assets `
Creditors 33,250 Cash 2,500
General Reserve 9,000 Bank 10,000
Investments Fluctuation Reserve 3,000 Debtors 25,000
Capital A/cs: Less: Provision for Doubtful Debts 2,000 23,000
Mandeep 75,000 Stock 25,000
Randeep 50,000 Investments (At Cost) 12,500
Sandeep 50,000 1,75,000 Land and Building 1,00,000
Goodwill 47,250
2,20,250 2,20,250
In order to determine the balance due to Sandeep it was mutually agreed that:
(i) Land and Building be valued at ` 1,25,000.
(ii) Investments Fluctuation Reserve be brought down to ` 1,350.
(iii) All Debtors were good.
(iv) Stock is valued at ` 23,500.
(v) Goodwill be valued at one year’s purchase of the average profit of the past five years.
(vi) Sandeep’s share of profit till the date of death be calculated on the basis of average
profit of the preceding three years.