Question

Babita, Chetan and David are partners in a firm sharing profits in the ratio of 2 : 1 : 1 respectively. Firm closes its accounts on 31st March every year. Chetan died on 30th September, 2012. There was a balance of ₹ 1,25,000 in Chetan's Capital Account in the beginning of the year. In the event of death of any partner, the Partnership Deed provides for the following:
(a) Interest on capital will be calculated at the rate of 6% p.a.
(b) The executor of deceased partner shall be paid ₹ 24,000 for his share of goodwill.
(c) His share of Reserve Fund of ₹ 12,000, shall be paid to his executor.
(d) His share of profit till the date of death will be calculated on the basis of sales. It is also specified that the sales during the year 2011-12 were ₹ 4,00,000. The sales from 1st April, 2012 to 30th September, 2012 were ₹ 1,20,000. The profit of the firm for the year ending 31st March, 2012 was ₹ 2,00,000.
Prepare Chetan's Capital Account to be presented to his executor.

Answer 1

Chetan’s Capital A/c

 

Dr.	Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Chetan’s Executor’s A/c		1,79,750	Capital	1,25,000
			Interest on Capital (for 6 months)	3,750
			Babita’s Share Capital A/c*	16,000
			David’s Share Capital A/c*	8,000
			Share of Reserve	12,000
			P & L Suspense A/c**	15,000
		1,79,750		1,79,750

Working Note: *

${\displaystyle \text{Chetan share of goodwill}=\text{Rs} 24,000}$

This share will be contributed by remaining partners in their Gaining Ratio

${\displaystyle \text{Gaining ratio of Babita and david}=2:1}$

Babita's share of contribution = ${\displaystyle \frac{2}{3}\times 24,000=\text{Rs} 16,000}$

David's share of contribution = ${\displaystyle }$${\displaystyle \frac{1}{3}\times 24,000=\text{Rs} 8,000}$

**Sales in the year 2011-12 = 4,00,000

Profit for year 2011-12 = 2,00,000 = 50% of Sales.

Therefore, Profit for the Period Apr 01 to 30^th Sep = 50% of Sales of the same period

Share of Profit to be divided = 50% of Rs 1,20,000 = Rs 60,000

Chetan’s Share of Profit = 1/4^th of Rs 60,000 = Rs 15,000