Page 173 - DEBKVOL-1

Chapter 7 Death of a Partner 7.15
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Solution:
Dr. DEV’S CAPITAL ACCOUNT Cr.
Particulars ` Particulars `
To Drawings A/c (Medical Bills) 15,000 By Balance b/d 77,000
To Profit and Loss A/c (WN 3) 22,800 By Interest on Capital A/c (WN 1) 2,310
To Dev’s Executors’ A/c (Balancing Figure) 51,935 By Profit and Loss Suspense A/c (WN 2) 10,425
89,735 89,735

Working Notes:
1. Date of Death of Dev = 30th June, 2014
Period from 1st April, 2014 to 30th June, 2014 = 3 Months.

12 3
Interest on Dev’s Capital = ` 77,000 × ¥ = ` 2,310.
100 12
2. Calculation of Dev’s Share in Profit:
` (2,04,000 + 1,80,000 + 90,000 – 57,000 )
(i) Average Profit of the Firm = = ` 1,04,250.
4
(ii) Dev’s Share of Profit = ` 1,04,250 × 2/5 × 3/12 = ` 10,425.
3. Share in Profit and Loss A/c (Debit Balance of Profit and Loss A/c) = ` 57,000 × 2/5 = ` 22,800.

Illustration 12.
A, B and C are partners sharing profits in the ratio of 4 : 3 : 1. As per Partnership Deed, on the
death of any partner, his share of goodwill is to be valued at half of the profits credited to his
account during the previous four completed years.
B died on 1st May, 2018. The firm’s profits for the last four years ended 31st March, were:
2015—` 1,00,000; 2016—` 80,000; 2017—` 60,000; 2018—` 1,60,000.
Calculate the amount that should be credited to B in respect of his share of goodwill.

Solution: Total Profit for the last 4 years = ` (1,00,000 + 80,000 + 60,000 + 1,60,000)
= ` 4,00,000.
Profit credited to B during the last 4 years = ` 4,00,000 × 3/8 = ` 1,50,000.

B’s Share of Goodwill is valued at half of the profits credited to his Account during the last
4 years = ` 1,50,000 × 1/2 = ` 75,000.

Unsolved Questions

1. DK, PK and GK were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. PK died on 31st
May, 2018. His share of profit from the closure of the last accounting year till the date of death, was to be
calculated on the basis of the average of three completed years of profits before death. Profits for the years
ended 31st December, 2015, 2016 and 2017 were ` 17,000; ` 15,000 and ` 13,000 respectively.
Calculate PK’s share of profit till his death and pass the necessary Journal entry for the same.
[Ans.: PK’s Share of Profit—` 1,875.]