Practical Problem 04
Practical Problems | Q 4 | Page 204
Virendra, Devendra AND Narendra Were partners Sharing Profit and Losses in the RATIO of 3:2:1.
Their BALANCE Sheet AS on 31st March 2019 WAS AS follows.
BALANCE Sheet AS on 31st March 2019
Land & Building
Capital Account :
Cash at Bank
Mr. Virendra died on 31st August 2019 AND the partnership deed provided that the event
of the DEATH of Mr. Virendra his executors be entitled to be PAID out.
1. The CAPITAL to his credit AT the DATE of DEATH.
2. His proportion of Reserve AT the DATE of LAST BALANCE sheet.
3. His proportion of Profits to DATE of DEATH BASED on the AVERAGE profits of the LAST four YEARS.
4. His SHARE of Goodwill should be CALCULATED AT two YEARS PURCHASE of the profits of the LAST four
YEARS for the YEAR ended 31st MARCH were AS follows –
2016 Rs 40,000 2017 Rs 60,000 2018 Rs 70,000 2019 Rs 30,000
5. Mr. VIRENDRA HAS DRAWN ` 3000 p.m. to DATE of DEATH, There is no Increase and Decrease the Value of Assets and Liabilities.
Prepare Mr. Virendra Executors A/c
1) Calculation of Share of Goodwill
Goodwill = Average Profit x No of year of Purchase
= (40,000 + 60,000 + 70,000 + 30,000)/4 x 2
= 2,00,000/4 x 2
= 50,000 x 2
2) Ramesh Share of Goodwill = Firm Goodwill x Ramesh Share
= 3,60,000 x 3/6
= Rs 50,000
Calculation of Share of Profit Due to Ramesh
3) Share of Profit Due to Ramesh = Last Year Profit x Share of Profit x Period
= 50,000 x 3/6 x 5/12
= 10,417 (Profit & Loss Suspense A/c)
In the books of the partnership Firm
Dr Virendar’s Capital A/c Cr
To Drawings A/c (3,000 x 5 Months)
By Balance b/d
By Goodwill A/c
By Profit & Loss Suspense A/c
By Reserve Fund A/c