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Question
Ram, Manohar and Joshi were partners in a firm. Joshi 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 financial years of profits before death. Profits for the years ended 31st March, 2016, 2017 and 2018 were ₹ 7,000; ₹ 8,000 and ₹ 9,000 respectively. Calculate Joshi's share of profit till the date of his death and pass necessary Journal entry for the same.
Solution
`"Average profit" = "Profit for last 3 years"/3`
`"Average profit" = (7,000 + 8,000 + 9,000)/3 = "Rs" 8,000`
Joshi’s Profit Share (from April 01, 2018 to May 31, 2018)
= `8,000 xx 2/12 xx 1/3 = "Rs" 444`
Journal
|
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
Profit and Loss Suspense A/c |
Dr. |
|
444 |
|
|
To Joshi’s Capital A/c |
|
|
444 |
|
|
(Joshi’s profit share credited to his capital account) |
|
|||
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Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
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Liabilities |
Amount (₹) |
Assets |
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|
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|
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|
Liabilities |
Amount (₹) |
Assets |
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||
|
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||
|
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||
|
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|
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|||
|
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||||
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|
Liabilities |
Amount |
Assets |
Amount |
|
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| Capital A/cs: | Sundry Debtors |
80,000 |
||
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Amount (₹) |
Assets |
Amount (₹) |
|
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Assets | Amount (₹) |
|
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