Page 162 - DEBKVOL-1

7.4 Double Entry Book Keeping—CBSE XII
Illustration 3.
A, B and C were partners sharing profits and losses in the ratio of 5 : 3 : 2. On 31st March, 2017,
their Balance Sheet stood as:

Liabilities ` Assets `
Capital A/cs: Goodwill 25,000
A 1,50,000 Leasehold 1,00,000
B 1,25,000 Patents 30,000
C 75,000 3,50,000 Machinery 1,50,000
Workmen Compensation Reserve 10,000 Stock 50,000
General Reserve 20,000 Debtors 1,40,000
Sundry Creditors 1,55,000 Cash at Bank 40,000
5,35,000 5,35,000

C died on 1st August, 2017. It was agreed that:
(i) Goodwill of the firm is to be valued at 2½ years purchase of the average of annual profits
of the last 4 years. The profits for the preceding years were ` 65,000; ` 60,000; ` 80,000 and
` 75,000.
(ii) Machinery be valued at ` 1,40,000; Patents be valued at ` 40,000; Leasehold be valued at
` 1,25,000 on 1st August, 2017.
(iii) For the purpose of calculating C’s share in the profits of 2017–18, the profits in 2017–18
should be taken to have accrued on the same scale as in 2016–17.
(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 2017–18.

Note: The firm closes its accounts on 31st March every year. (AI 2006, Modified)
Solution:
Dr. C’S CAPITAL ACCOUNT Cr.
Date Particulars ` Date Particulars `

2017 2017
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 (Gain) 5,000
(Balancing Figure) By A’s Capital A/c (Goodwill) 21,875
By B’s Capital A/c (Goodwill) 13,125
By Profit and Loss Suspense A/c 5,000
(WN 2)
By Workmen Compensation
Reserve A/c 2,000
By General Reserve A/c 4,000
1,26,000 1,26,000