Question

C, F and S were partners in a firm, sharing profits and losses in the ratio of 5:4:1. F died on 30^th June, 2021. The firm earned a net profit of % 3,00,000 for the year ended 31.3.2021. The deceased partner’s share in the year of his death was to be calculated on the basis of sales. The sales for the year ended 31.3.2021 were ₹ 24,00,000, whereas the sales from 1st April, 2021, to 30th June, 2021 were ₹ 4,00,000.

Calculate F’s share in the profits till the date of his death and pass the necessary journal entry for the same.

Answer 1

The profit-sharing ratio of the partners C, F, and S is 5:4:1.

The firm earned a net profit of ₹ 3,00,000 for the year ending 31st March 2021.

The sales for the entire year (1st April 2020 to 31st March 2021) were ₹ 24,00,000.

The sales from 1st April 2021 to 30th June 2021 (the period of F’s death) were ₹ 4,00,000.

F died on 30th June 2021. F’s share in the profit for the year of death is to be calculated on the basis of sales.

Total sales for the year (1st April 2020 to 31st March 2021) = ₹ 24,00,000

Sales from 1st April 2021 to 30th June 2021 = ₹ 4,00,000

Sales before 1st April 2021 (i.e., from 1st April 2020 to 31st March 2021) = ₹ 24,00,000 - ₹ 4,00,000 = ₹ 20,00,000

Now, calculate the proportion of sales from 1st April 2021 to 30th June 2021 to the total sales.

F’s Share in Profit = `"Sales from 1st April 2021 to 30th June 2021​"/"Total Sales for the year" xx "Net Profit"`

F’s Share in Profit = `400000/2400000 xx 300000`

F’s Share in Profit = `1/6 xx 300000`

= 50,000

F's Share in the profits is `4/10` of the profits:

F's Share = `50,000 xx 4/10`

F's Share = ₹ 20,000

The following journal entry will be passed to record F's share of the profit earned during the year, up to the date of his death:

Journal Entry for F's Share of Profit
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
30.06.2021	Profit and Loss Suspense A/c   ...Dr.		20,000	-
	To F’s Capital A/c		-	20,000
	(Being transferred F's share of profit till date of death)