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Question
Kavita, Leena and Monica are partners in firm sharing profits in the ratio of 1 : 1 : 3 respectively. Their Capital Accounts showed the following balances on 31st March, 2012: Kavita ₹ 70,000; Leena ₹ 65,000 and Monica ₹ 2,10,000. Firm closes its accounts every year on 31st March. Kavita died on 30th September, 2012. 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 deceased partner's share in the goodwill of the firm will be calculated on the basis of 2 years' purchase of the average profit of last three years. The profits of the firm for the last three years were ₹ 90,000; ₹ 1,00,000 and ₹ 1,10,000 respectively.
(c) Her share in the Reserve Fund of the firm will be paid. The Reserve Fund of the firm was ₹ 60,000 at the time of Kavita's death.
(d) Her 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 ₹ 20,00,000. The sales from 1st April, 2012 to 30th September, 2012 were ₹ 4,00,000. The profit of the firm for the year ending 31st March, 2012 was ₹ 2,00,000.
Prepare Kavita's Capital Account to be presented to his legal representative.
Solution
Kavita’s Capital A/c
|
Dr. |
|
Cr. |
|||
| Particulars |
Amount (Rs) |
Particulars |
Amount (Rs) |
||
|
Kavita’s Executor’s A/c |
1,32,100 |
Capital |
70,000 |
||
|
|
|
Interest on Capital |
2,100 |
||
|
|
|
Leena’s Capital A/c* |
10,000 |
||
|
|
|
Monica’s Capital A/c* |
30,000 |
||
|
|
|
Share of Reserve |
12,000 |
||
|
|
|
P & L Suspense A/c** |
8,000 |
||
|
|
1,32,100 |
|
1,32,100 |
||
Working Note:
*Calculation of Goodwill
On the basis of 2 yrs purchase of average 3 years profit
`"Average profit" = "Sum of profits"/"No. of years" = (90,000 + 1,00,000 + 1,10,000)/3 = "Rs" 1,00,000`
`"Goodwill" = "Average Profit" xx 2 = "Rs" 1,00,000 xx 2 = "Rs" 2,00,000`
`"Kavita's share of goodwill" = "Rs"2,00,000 xx 1/5 = "Rs" 40,000`
This share will be contributed by remaining partners in their gaining ratio
Gaining Ratio of Leena and Monica = 1 : 3
`"Leena's share of contribution" = 1/4 xx 40,00 = "Rs" 10,000`
`"Monica's share of contribution" = 3/4 xx 40,000 = "Rs" 30,000`
** Sales in the year 2011-12 = 20,00,000
Profit for year 2011-12 = 2,00,000 = 10% of Sales.
Therefore, Profit for the Period 1 Apr – 30th Sep = 10% of Sales of the same period
Share of Profit to be divided = 10% of Rs 4,00,000 = Rs 40,000
Kavita’s Share of Profit = 1/5th of Rs 40,000 = Rs 8,000
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|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
| Creditors |
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Cash at Bank | 3,300 | ||
| Capital A/cs: |
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Sundry Debtors |
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|
Liabilities |
₹ |
Assets |
₹ |
||
|
Creditors |
11,000 |
Building |
20,000 |
||
|
Reserves |
6,000 |
Machinery |
30,000 |
||
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|
Capital A/cs: |
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| A |
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| C |
15,000 |
65,000 |
|||
|
87,000 |
87,000 |
||||
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|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
|
Sundry Creditors |
2,70,000 |
Cash in Hand |
42,500 |
||
|
General Reserve |
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||
|
Capital A/cs: |
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|
7,90,000 |
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||||
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|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
|
Bills Payable |
2,000 |
Cash at Bank |
5,800 |
||
|
Employees' Provident Fund |
5,000 |
Bills Receivable |
800 |
||
|
Workmen Compensation Reserve |
6,000 |
Stock | 9,000 | ||
| General Reserve | 6,000 | Sundry Debtors | 16,000 | ||
| Loans | 7,100 | Furniture | 2,000 | ||
|
Capital A/cs: |
Plant and Machinery | 6,500 | |||
| X | 22,750 | Building | 30,000 | ||
| Y |
15,250 |
Advertising Suspense | 6,000 | ||
| Z |
12,000 |
50,000 |
|||
|
76,100 |
76,100 |
||||
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|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
|
Creditors |
2,00,000 |
Building |
2,00,000 |
||
|
Employees' Provident Fund |
1,50,000 |
Machinery |
3,00,000 |
||
|
General Reserve |
36,000 |
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|
Capital A/cs: |
Debtors | 80,000 | |||
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3,00,000 |
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1,50,000 |
7,00,000 |
|||
|
11,00,000 |
11,00,000 |
||||
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Prepare Revaluation Account, X's Capital Account and X's Executor's Account as on 1st October, 2018.
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BALANCE SHEET as at 31st March, 2018
| Liabilities | Amount (₹) |
Assets | Amount (₹) |
||
| X's Capital A/c | 2,40,000 |
Machinery |
2,40,000 | ||
| Y's Capital A/c | 1,60,000 | Furniture | 1,50,000 | ||
|
Z's Capital A/c |
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| Sundry Creditors | 40,000 | Cash in Hand | 22,000 | ||
| Z's Current A/c | 10,000 | ||||
| 6,35,000 | 6,35,000 | ||||
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Assets | Amount (₹) |
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| 1,26,800 | 1,26,800 |
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(b) Machinery and Stock be revalued at ₹ 45,000 and ₹ 8,000 respectively.
(c) Claim on account of workmen compensation is ₹ 6,000.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the new firm.
Suresh, Ramesh, Mahesh and Ganesh were partners in a firm sharing profits in the ratio of 2 : 2 : 3 : 3. On 1st April, 2016, their Balance Sheet was as follows:
BALANCE SHEET OF SURESH, RAMESH, MAHESH AND Ganesh
as on 1st April, 2016
| Liabilities | Amount (₹) |
Assets | Amount (₹) |
|
| Capital A/cs: | Fixed Assets | 6,00,000 | ||
| Suresh | 1,00,000 | Current Assets | 3,45,000 | |
| Ramesh | 1,50,000 | |||
| Mahesh | 2,00,000 | |||
| Ganesh | 2,50,000 | 7,00,000 | ||
| Sundry Creditors | 1,70,000 | |||
| Workmen Compensation Reserve | 75,000 | |||
| 9,45,000 | 9,45,000 | |||
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At the time of admission of a new partner, Which adjustments are required:
Bakul, Champak and Darshan were partners in the firm sharing profits in the ratio of 5:4:1. The profit of the firm for the year ending on March 31, 2019, was Rs. 1,00,000. Champak dies on June 30, 2019. What is Champak's share of profit for the period from April 1 to June 30, 2019?
Assertion (A): New Profit Sharing Ratio is the ratio in which old partners including the new partner, share the profits or losses of the firm.
Reason (R): When a new partner is admitted to the firm it is necessary to calculate the new profit sharing ratio with the help of the share agreed to forgo by the old partners.
A and B were partners. They shared profits as A-`1/2`, B-`1/3` and carried to reserve `1/6`. B died. The balance of reserve on the date of B's death was ₹ 30,000. B's share of a reserve will be:
A, B and C are partners sharing profits in the ratio of 4 : 3 : 2. B retires and his share was taken up by A and C in the ratio 3 : 2. New profit sharing ratio will be ______.
