Page 126 - ISCDEBK-12

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

Unsolved Questions

1. X, Y and Z are in partnership sharing profits equally. X dies on 30th June, 2017 and the Partnership
Deed provided inter alia that:

(i) The share of deceased partner’s Capital Account shall be taken at the balance of the Capital
Accounts as on the date of the last financial year, less the withdrawals, if any, made to the date
of death.
(ii) His share of profit to the date of death be calculated on the basis of the average profits of the
three preceding years.
(iii) Goodwill of the firm shall be taken at one year’s purchase of the average profits of the preceding
five years.
(iv) The firm’s Freehold property shall be taken at an independent valuation.
The firm’s Balance Sheet as at 31st March, 2017 was as under:
Liabilities ` Assets `

Capital A/cs: Goodwill 56,700
X 90,000 Freehold Property 1,20,000
Y 60,000 Stock 45,000
Z 60,000 2,10,000 Debtors 30,000
Creditors 56,700 Bank 13,500
Cash 1,500
2,66,700 2,66,700

Freehold property was valued at ` 1,74,000.
The profits for five years ended 31st March were:
2012–13—` 34,500; 2013–14—` 42,000; 2014–15—` 27,000; 2015–16—` 24,000 and 2016–17—` 30,000.
Prepare X’s Capital Account to be rendered to his representatives.

2. In the partnership agreement between Sajan, Arjan and Dharam who were sharing profits 4 : 2 : 2.
Goodwill was to be valued on the death of any partner on the basis of such partner’s share of 2 years’
profits calculated on the average of 5 years’ profits immediately preceding the year of death less 10%.
Profits for the years ended 31st March, 2014, 2015, 2016, 2017 and 2018 were ` 15,000, ` 25,000,
` 40,000, ` 5,000 (Loss) and ` 2,000 respectively.
The deceased partner’s share of profits for the period of his life-time in the year of death was to be
based on the average of the profits of the previous 3 years plus 10%.
Sajan died on 31st August, 2018. His Capital Account showed a credit of ` 10,000 on 1st April, 2018
and he had drawn ` 1,500 since that date.
Show amount of Goodwill and the share of profits payable to him.

GUIDE TO ANSWERS

1. Transfer to X’s Executor’s Account—` 1,01,850.
2. Amount payable to Sajan’s Executors—` 24,161 (approx.); Share of Goodwill of Sajan—` 13,140 (approx.);
Share of Profit of Sajan—` 2,521 (approx.).