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Chapter 7 Death of a Partner 7.11
.
Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars M (`) N (`) O (`) Particulars M (`) N (`) O (`)
To Drawings A/c ... ... 12,000 By Balance b/d 1,35,000 95,000 74,000
To Goodwill A/c 5,000 3,000 2,000 By Revaluation A/c 5,000 3,000 2,000
To Profit and Loss A/c 75,000 45,000 30,000 (Profit)
To M’s Capital A/c ... 8,750 ... By N’s Capital A/c 8,750 ... 14,000
To O’s Capital A/c ... 14,000 ... (Goodwill) (WN 1)
To O’s Loan A/c ... ... 1,000 By Investment Fluctua-
To Advertisement tion Reserve A/c 3,500 2,100 1,400
Expenditure A/c 1,000 600 400 By Workmen
To Bank A/c ... ... 11,200 Compensation
To O’s Executors’ A/c ... ... 36,000 Reserve A/c 3,000 1,800 1,200
To Balance c/d 74,250 30,550 ...
1,55,250 1,01,900 92,600 1,55,250 1,01,900 92,600

BALANCE SHEET OF THE NEW FIRM as at 1st April, 2018
Liabilities ` Assets `
Sundry Creditors 11,000 Patents 66,000
Employees’ Provident Fund 6,000 Machinery 48,800
O’s Executors’ A/c 36,000 Stock 20,000
Workmen Compensation Claim 1,000 Sundry Debtors 24,000
Bank Overdraft (WN 3) 2,200 Accrued Income 2,200
M’s Capital A/c 74,250
N’s Capital A/c 30,550 1,04,800
1,61,000 1,61,000

Working Notes:
1. Calculation of Gain/(Sacrifice) of Each Partner:
15 - 20
M’s Gain = 3/8 – 5/10 = = –5/40 (Sacrifice);
40
25 -12
N’s Gain = 5/8 – 3/10 = = 13/40 (Gain).
40
2. Adjustment of Goodwill:
( 2,02,000 ` + 32,000 `
`
+ 28,000 `
+ 1,50,000)
Firm’s Goodwill = × 2.5 = ` 70,000
4
M’s Sacrificed Share of Goodwill = ` 70,000 × 5/40 = ` 8,750;
N’s Gained Share of Goodwill = ` 70,000 × 13/40 = ` 22,750;
O’s Sacrificed Share of Goodwill = ` 70,000 × 2/10 = ` 14,000.
N is the only gaining partner.
3. Dr. BANK ACCOUNT Cr.
Particulars ` Particulars `

To Balance b/d 600 By O’s Capital A/c 11,200
To Investment A/c (Sale) 8,200
To Bad Debts Recovered A/c 200
To Balance c/d 2,200
11,200 11,200