question_answer
Mahesh, Mukesh, and Raju were partners in a firm sharing profit and losses in the ratio of 2 : 1 : 1 . Their balance sheet as at 31st March, 2018 was as follows: Balance Sheet as at 31st March, 2018 Liabilities | | Amt (Rs.) | Assets | Amt (Rs.) |
Creditors | | 10,200 | Cash in Hand | 680 |
General Reserve | | 10,880 | Cash at Bank | 17,000 |
Capital A/cs | | | Furniture | 30,600 |
Mahesh | 34,000 | | Stock | 13,600 |
Mukesh | 17,000 | | Debtors | 20,400 |
Raju | 17,000 | 68,000 | Bills Receivable | 6,800 |
| | 89,080 | | 89,080 |
On 30th June, 2018 Raju died. As per the provisions of a partnership deed, the executors of a deceased partner were entitled to the following: (i) The capital to his credit at the date of last balance sheet. |
(ii) Interest on capital @ 10% p.a. |
(iii) Share of goodwill on the basis of three years' purchase of the average profits of last three years. |
(iv) Share of profit in the year of death, till the date of his death, on the basis of last year's profit. |
The profit of the firm during the previous three years were: I ? Rs. 17,000 II ? Rs. 30,600 III ? Rs. 23,800. Raju's executors were paid Rs. 9,482.50 on 1st July, 2018 and the balance in three equal instalments of equal intervals of 6 months starting from 31st December, 2018 with interest @ 8% p.a. Prepare Raju's capital account and Raju's executors account upto 31st December, 2018.
Answer:
Dr Raju's Capital Account Cr Particulars | Amt (Rs.) | Particulars | Amt (Rs.) |
To Raju's Executor's A/c | 39,482,50 | By Balance b/d | 17,000.00 |
| | By Interest on Capital A/c | 425.00 |
| | \[\left( 17,000\times 10%\times 3/12 \right)\] | |
| | By Mahesh's Capital A/c | 11,900.00 |
| | By Mukesh's Capital A/c | 5,950.00 |
| | By Profit and Loss Suspense A/c | 1,487.50 |
| | By General Reserve A/c | 2,720.00 |
| 39,482.50 | | 39,482.50 |
Dr Raju's Executors Account Cr Date | Particulars | Amt (Rs.) | Date | Particulars | Amt (Rs.) |
2018 | | | 2018 | | |
Jul 1 | To Bank A/c | 9,482.50 | Jun 30 | By Raju?s Capital A/c | 39,482.50 |
Dec 31 | To Bank A/c | 11,200.00 | Dec 31 | By Interest A/c | 1,200.00 |
| (10,000+1200) | | | \[(30,000\times 8%\times 6/12)\] | |
Dec 31 | To Balance c/d | 20,000.00 | | | |
| | 40,682.50 | | | 40,682.50 |
Working Notes 1. Average Profit \[=\frac{17,000+30,600+23,800}{3}=\frac{71,400}{3}=Rs.\,23,800\] Firm's Goodwill \[=23,800\times 3=Rs.\,71,400\] Raju's Share of Goodwill \[=71,400\times \frac{1}{4}=Rs.\,17,850\] To be contributed by Mahesh and Mukesh in gaining ratio, i.e. 2 : 1 2. Raju's Share of Profit \[=23,800\times \frac{3}{12}\times \frac{1}{4}=Rs.\,1,487.50\]