Page 171 - DEBKVOL-1

Chapter 7 Death of a Partner 7.13
.
Working Note:
` 24, 000 + ` 8, 000 + ` 16, 000 - ` 10, 000 + ` 16, 000 ` 54, 000
Average Profit = = = ` 10, 800
5 5
3 1
Joshi’s Share of Profit = 10, 800` ¥ ¥ = ` 900.
12 3
Illustration 9 (Treatment of Goodwill).
D, E, F, P and Z were partners in a firm sharing profits and losses in the ratio of 5 : 4 : 3 : 2 : 1
respectively. Unfortunately, P and Z met with a tragic car accident in which both of them died.
The goodwill of the firm was valued at ` 1,50,000 and D, E and F decided to share the future
profits and losses in the ratio of 4 : 6 : 5.
Give the Journal entries to record the above.
Solution: JOURNAL

Date Particulars L.F. Dr. (`) Cr. (`)
E’s Capital A/c ...Dr. 20,000
F’s Capital A/c ...Dr. 20,000
To P’s Capital A/c 20,000
To Z’s Capital A/c 10,000
To D’s Capital A/c 10,000
(Goodwill adjusted by debiting gaining partners and crediting
sacrificing partners)
Working Note:
STATEMENT SHOWING THE REQUIRED ADJUSTMENT FOR GOODWILL
Partners D (`) E (`) F (`) P (`) Z (`)
Share of Goodwill before Death of P and Z (5 : 4 : 3 : 2 : 1) 50,000 40,000 30,000 20,000 10,000
Share of Goodwill after Death of P and Z (4 : 6 : 5) 40,000 60,000 50,000 ... ...
Gain (+)/Sacrifice (–) (–)10,000 (+)20,000 (+)20,000 (–)20,000 (–)10,000
Alternatively: D E F
I. Their New Shares 4/15 6/15 5/15
II. Their Old Shares 5/15 4/15 3/15
III. Gain/(Sacrifice ) (I – II) (1/15) (Sacrifice) 2/15 (Gain) 2/15 (Gain)
In this case, D has also sacrificed his share to the extent of 1/15 in favour of E and F. They are required to
compensate D along with P and Z for their sacrifice.
Illustration 10.
Following is the Balance Sheet of Punita, Rashi and Seema who are sharing profits in the ratio
2 : 1 : 2 as on 31st March, 2013:

Liabilities ` Assets `
Creditors 38,000 Building 2,40,000
Bills Payable 2,000 Stock 65,000
Capital A/cs: Punita 1,44,000 Debtors 30,000
Rashi 92,000 Cash at bank 5,000
Seema 1,24,000 3,60,000 Profit and Loss A/c 60,000
4,00,000 4,00,000
Punita died on 30th September 2013. She had withdrawn ` 44,000 from her capital on
July 1, 2013. According to the partnership agreement, she was entitled to interest on capital
@ 8% p.a. Her share of profit till the date of death was to be calculated on the basis of the