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

3. Dr. BANK ACCOUNT Cr.
Particulars ` Particulars `
To Balance b/d 29,000 By Vicky’s Drawings A/c 25,000
To Investment A/c 21,000 By Vicky’s Executor’s A/c 24,000
By Balance c/d 1,000
50,000 50,000
Illustration 12.
Karun, Som and Mehar were partners sharing profits and losses in the ratio of 5 : 3 : 2. On 31st March,
2019 their Balance Sheet was as follows:
Liabilities ` Assets `
Trade Creditors 1,35,000 Goodwill 25,000
Employees’ Provident Fund 20,000 Patents 1,30,000
Investment Fluctuation Reserve 17,500 Machinery 1,56,000
Workmen Compensation Reserve 17,500 Investments 15,000
Capital A/cs: Stock 50,000
Karun 3,37,500 Sundry Debtors 62,000
Som 2,37,500 Less: Provision for Doubtful Debts 2,000 60,000
Mehar 1,85,000 7,60,000 Loan to Mehar 5,000
Cash at Bank 1,29,000
Advertisement Expenditure 5,000
Profit and Loss A/c (2018–19) 3,75,000
9,50,000 9,50,000

Mehar died on 1st August, 2019. Mehar had withdrawn ` 25,000 during 2019–20. It was agreed between
his executors and the remaining partners that:
(i) Goodwill be valued at 2½ years’ purchase of average of four completed years’ profits which were:
2015–16 ` 5,05,000; 2016–17 ` 60,000; 2017–18 ` 90,000.
(ii) Mehar‘s Share of profit from the closure of last accounting year till the date of death be calculated
on the basis of the average of three completed years’ profits before death.
(iii) Patents were undervalued by ` 70,000; Stock was overvalued by ` 20,000.
(iv) Machinery was to be valued at ` 1,75,000.
(v) Provision of ` 5,000 be made in respect of Outstanding Legal charges.
(vi) Out of the amount of Insurance Premium which was debited to Profit and Loss Account, ` 5,000 be
carried forward as an unexpired Insurance.
(vii) Included in Trade Creditors was an item of ` 1,100 which was not to be paid, therefore, had to be
written back.
(viii) Provision for Doubtful Debts is to be maintained at 5% of Sundry Debtors.
(ix) Claim on account of Workmen Compensation is ` 10,000.
(x) Investments were sold for ` 21,000 and a sum of ` 24,000 be paid to Mehar’s Executors immediately.
The remainder to be paid in four equal half-yearly instalments together with interest @ 10% p.a.
You are required:
(a) to give necessary Journal entries to be passed on Mehar’s death;
(b) to prepare the Capital Accounts of all the partners;
(c) to prepare the Balance Sheet of Karun and Som immediately after Mehar’s death;
(d) to prepare Mehar’s Executor’s Account till it is finally settled.