Question 31:

Trisha, Anisha and Rishika were partners in a firm sharing profits and losses in the ratio of 2:2:1. Their

Balance Sheet as at 31st March, 2025 was as follows:

Trisha died on 31st July, 2025. According to the partnership deed, the executors of the deceased partner were entitled to:

(i) Balance in Partner's Capital Account.

(ii) Salary @  ₹15,000 per quarter.

(iii) Share of goodwill calculated on the basis of twice the average of past three year's profits.

(iv) Share of profits from the closure of the last accounting year till the date of death on the basis of last year's profit. Profit for 2022-23, 2023-24 and 2024-25 were 1,00,000, 2,00,000 and 1,50,000 respectively.

(v) Trisha withdrew ₹20,000 on 1st May, 2025 for her personal use.

Showing your working clearly. Prepare Trishas Capital Account to be rendered to her executors.

(CBSE 2023 Modified)

 

Answer:

Working Notes:

 

1. Salary = 15,000×4/3=20,000

 

2. Goodwill

Total profit =1,00,000+2,00,000+1,50,000=4,50,000

Average Profit = 4,50,000/3=1,50,000

Goodwill = 1,50,000×2=3,00,000

 

Traisha’s Share of goodwill =3,00,000×2/5=1,20,000

 

80,000 will be shared by partners

Anisha = 1,20,000×2/3=80,000

Rishika = 1,20,000×1/3=40,000

 

3. Calculation of Share of Profit

Last years profit 1,50,000

 

Traisha’s Share of Profit = 1,50,000×2/5×4/12=20,000

 

Question 32:

Madhav, Raghav and Purav were partners in a firm sharing profits and losses in the ratio of 3:1:1. Their Balance Sheet as at 31st March, 2023 was as follows:

BALANCE SHEET OF MADHAV, RAGHAV AND PURAV as at 31st March, 2023

Purav died on 30th September, 2023. According to Partnership deed, his legal representatives are entitled to the following:

(i) Balance in his Capital Account.

(ii) Share of profit up to the date of death to be calculated on the basis of last year's profit.

(iii) Share of goodwill calculated on the basis of three years purchase of average profits of last four years.

(iv) Interest on capital @ 12% p.a.

Puravs share of profit was 3,000 and the average profit of last four years was 50,000. Purav's drawings up to the date of death were ₹10,000.

Prepare Purav's Capital Account to be rendered to his legal representatives.

(CBSE 2024)

Answer:

 

Working note:

WN 1: Share of goodwill calculated on the basis of three years purchase of average profits of last four years

Average profit of last four years was 50,000

Firm’s Goodwill = 50,000×3=1,50,000

Purav’s Share of Goodwill = 1,50,000×1/5=30,000

10,000 will be compensated by Madhav and  Raghav in the ratio of 3:1

Madhav=30,000×3/4=22,500

Raghav=30,000×1/4=7,500

WN 2: Interest on Capital for six month

40,000×12/100×6/12= 2,400

WN 3: Share in General Reserve in 3:1:1

Purav’s Share= 50,000×1/5=10,000

WN 4: Share of profit up to the date of death to be calculated on the basis of last year's profit

1. Share of profit given in the question= 3,000

2. When annual accounts are not closed, P&L Suspense A/c is debited.

 

Question 33:

X, Y and Z were partners in a firm sharing profits in the ratio of 2 : 2 : 1. On 31st March, 2025, their Balance Sheet was as follows:

 
Y died on 30th June, 2025. The Partnership Deed provided for the following on the death of a partner:
(i) Goodwill of the business was to be calculated on the basis of 2 times the average profit of the past 5 years. Profits for the years ended 31st March, 2025, 31st March, 2024, 31st March, 2023, 31st March, 2022 and 31st March, 2021 were ₹ 3,20,000 (Loss); ₹ 1,00,000; ₹ 1,60,000; ₹ 2,20,000 and ₹ 4,40,000 respectively.
(ii) Y's share of profit or loss from 1st April, 2025 till his death was to be calculated on the basis of the profit or loss for the year ended 31st March, 2025.
You are required to calculate the following:
(a) Goodwill of the firm and Y's share of goodwill at the time of his death.
(b) Y's share in the profit or loss of the firm till the date of his death.
(c) Prepare Y's Capital Account at the time of his death to be presented to his executors. 

 

Answer:

 

Working Notes:

WN1: Calculation of Share in General Reserve

Reserve=60,000×2/5= ₹ 24,000

WN2: Calculation of Share in Goodwill

Goodwill=Average Profit×No. of years' Purchase=1,20,000×2= ₹ 2,40,000

Y's share in Goodwill=2,40,000×2/5= ₹ 96,000, should be contributed by X & Z in 2:1

Average Profit=Total Profits of past years given/Number of year =1,00,000+1,60,000+2,20,000+4,40,000−3,20,000/5= ₹ 1,20,000

WN3: Calculation of Profit & Loss Suspense
Profit & loss Suspense (Loss)=3,20,000×2×3/5×12= ₹ 32,000

Question 34:

Kam, Monan and Sohan were partners sharing profits and losses in the ratio of 5:3:2. On 31st March, 2025, their Balance Sheet was:

Sohan died on 1st August, 2025. It was agreed that:

(i) Goodwill of the firm is to be valued at ₹1,75,000.

(ii) Machinery be valued at ₹1,40,000; Patents at ₹40,000; Land at ₹1,50,000 on this date.

(ii) For the purpose of calculating Sohan's share in the profits of the year of death, profits should be taken to have accrued on the same scale as in previous year, which were ₹75,000.

Prepare Revaluation Account and Sohan's Capital Account.

Answer:

 

Working Notes:

1 Calculation of share of Goodwill

Goodwill = ₹1,75,000

Sohan's share = 1,75,000×2/10= 35,000

Sohan's share ₹48,000 in goodwill will be compensated by Ram and Mohan in their gaining ratio (5:3)

 

Ram = 35,000×5/8= 21,875

Mohan = 35,000×3/8= 13,125

 

2 Calculation of share of profit (for 4 months)

Sohan’s share of profit till the date of his death was to be calculated on the basis of Profit for Previous

Profit for Previous the year 75,000

 

Profit earned by firm = ₹75,000×2/10×4/12 = 5,000

 

Question 35:

 Ajay, Vijay and Sanjay were partners in a firm sharing profits in the ratio of 5:3:2. Ajay died on 20th February, 2026. The Balance Sheet of the firm on that date was as follows:

According to the Partnership Deed, on the death of a partner, the executor of the deceased partner will be entitled to:

(i) Balance in Capital Account.

(ii) His share in profit/loss on revaluation of assets and reassessment of liabilities which were as follows.

 (a) Machinery is to be revalued at 45,000 and furniture at 7,000.

 (b) Provision of 10% was to be created for Doubtful Debts.

(iii) The amount payable to Ajay was transferred to his Executors' Loan Account which was to be paid later Prepare Revaluation Account, Partners' Capital Accounts, Ajay's Executors' Account and the Balance Sheet of Vijay and Sanjay who decided to continue the business keeping their capital balances in their new profit-sharing ratio. Any surplus or deficit was to be transferred to Current Accounts of the partners.

 

Answer:

 

 

 

 

Working Note:

Total adjusted Capital of remaining partner 20,050+12,700=32,750

Rearranged in New Profit sharing Raio 3:2

Vijay’s Capital=32,750×3/5=19,650

Sanjay’s Capital=32,750×2/5=13,100

 

 

Question 36:

Ramesh, Suresh and Dinesh were partners sharing profits and losses in the ratio of 3:2:1.Dinesh died on 1st May, 2025 on which date the capitals of Ramesh, Suresh and Dinesh after all necessary adjustments stood at 1,20,000, 80,000 and 50,000 respectively. Ramesh and Suresh decide to carry on the business for 8 months without settling the account of Dinesh. During the period of 8 months ended 31st December, 2025, profit of Rs. 40,000 is earned by the firm.

State which of the two options available with Dinesh's Executor under Section 37 of the Indian Partnership Act, 1932 should be exercised.

Also calculate the total amount payable to Dinesh's Executor if Ramesh and Suresh clear the dues of Dinesh on 31st December, 2025.

 

Answer:

 

Remaining partners Continued Business without any agreement therefore according to Section 37 of the Indian Partnership Act, 1932 executor of deceased partner can opt any of the option either of two Interest in capital or share of profit whichever is higher

 

Dinesh's Executor has the following options:

(i)                Interest @ 6% p.a. on balance amount =50,000×6/100×8/12 =72,000;

 

OR

 

(ii) Share in profit earned proportionate to his amount outstanding to total capital 50,000 2,50,000* x40,000 =8,000

*2,50,000 =1,20,000 + 80,000+50,000

Dinesh's Executor should exercise option (i),

Total amount payable to Dinesh's Executor = 50,000 +8,000=58,000