Page 96 - MA-12

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

Working Notes:
1. Calculation of Y’s Share of Goodwill:
( 50,000 + 80,000 + 1,10,000 + 2,20,000 1,60,00` ` ` ` - ` 0 0)
Firm’s Goodwill = × 2 = ` 1,20,000
5
Y’s Share of Goodwill = 1,20,000 × 2/5 = ` 48,000, which is contributed by X and Z in their gaining ratio
of 2 : 1.
Thus, X’s contribution = ` 48,000 × 2/3 = ` 32,000, and Z’s contribution = ` 4,80,000 × 1/3 = ` 16,000.
2. Y’s share in loss from the date of last Balance Sheet up to date of death = ` 1,60,000 × 2/5 × 3/12 = ` 16,000.
3. Y’s share in Workmen Compensation Reserve and General Reserve = 2/5 (` 40,000 + ` 27,500) = ` 27,000,
which is contributed by X and Z in their gaining ratio of 2 : 1.
X’s contribution = ` 27,000 × 2/3 = ` 18,000; Z’s contribution = ` 27,000 × 1/3 = ` 9,000.
Illustration 15.
A, B and C are partners in a firm. Their Balance Sheet as at 31st March, 2017 is given below:
Liabilities ` Assets `
Creditors 10,000 Plant and Machinery 20,000
General Reserve 10,000 Furniture and Fixtures 2,500
A’s Capital 20,000 Stock 10,500
B’s Capital 15,000 Debtors 15,000
C’s Capital 5,000 Investments 12,000
60,000 60,000

B died on 30th September, 2017. The Partnership Deed provides that the representatives
of the deceased partner shall be entitled to:
(i) Deceased Partner’s Capital as appearing in last Balance Sheet.
(ii) Interest on Capital @ 6% p.a. up to the date of death.
(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.