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Question
Sonali, Sohan and Shivain were partners in a pen manufacturing firm. They were sharing profits and losses in the ratio of 2: 2: 1. On 31st March, 2022 their Balance Sheet was as follows:
Balance Sheet of Sonali, Sohan and Shivain as on 31st March, 2022.
| Liabilities | Amount (₹) | Amount (₹) | Assets | Amount (₹) |
| Capitals Accounts: | Land and Building | 6,00,000 | ||
| Sonali | 4,00,000 | 12,00,000 | Plant and Machinery | 5,00,000 |
| Sohan | 4,00,000 | Debtors | 1,60,000 | |
| Shivani | 4,00,000 | Stock | 1,40,000 | |
| General Reserve | 1,00,000 | Cash in hand | 1,20,000 | |
| Creditors | 3,60,000 | Cash at Bank | 1,80,000 | |
| Bills Payable | 40,000 | |||
| 17,00,000 | 17,00,000 |
Sohan died on 30th June, 2022. According to Partnership Deed, his executors were entitled to:
- interest on capital @12% p.a.
- His share of goodwill which was ₹ 48,000.
-
His share of profit till the date of death was to be calculated on the basis of sales. The sales from 1st April, 2022 to 30th June, 2022 were ₹ 2,50,000. The sales and profits of the firm for the year ending 31st March, 2022 were ₹ 20,00,000 and ₹ 5,00,000 respectively.
Prepare Sohan’s Capital Account to be presented to his executors.
Solution
| Sohan's Capital Account | |||
| Particulars | Amount (₹) | Particulars | Amount (₹) |
| To Sohan's Executors A/c | 5,25,000 | By Balance b/d | 4,00,000 |
| By General Reserve A/c | 40,000 | ||
| By Interest on Capital A/c | 12,000 | ||
| By Sonali's Capital A/c (Goodwill) | 32,000 | ||
| By Shivain's Capital A/c (Goodwill) | 16,000 | ||
| By Profit and Loss Suspense A/c | 25,000 | ||
| 5,25,000 | 5,25,000 | ||
Working Notes:
- Sohan's share in General Reserve = `₹ 1,00,000 xx 2/5 = ₹ 40,000 `
- Interest on Sohan's Capital = `₹ 4,00,000 xx 12/100xx3/12 = ₹ 12,000`
- Sohan's Share in Goodwill = ₹ 48,000 (Given)
This will be contributed by Sonali and Shivain in their gaining ratio,` i.e.`, 2 : 1.
Sonali will compensate =`₹ 48,000xx2/3 = ₹ 32,000`
Shivain will compensate =` ₹ 48,000 xx 1/3 = ₹ 16,000` - Calculation of Sohan's share of profit upto the date of death:
Percentage of profit to sales for the year ended 31st March, 2022
`= (5,00,000)/(20,00,000)xx100`
= 25%
Profit upto the date of Sohan's death = 25% of ₹ 2,50,000
`= 25/100xx 2,50,000`
= ₹ 62,500
Sohan's share of profit = `₹ 62,500 xx 2/5 `
= ₹ 25,000
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