Death2022-2023

Loss for the year ended 31st March, 2021 was ` 90,000. Calculate deceased partner’s share of profit/loss from the beginning of the accounting year up to 31st December, 2021.

 

Date	Particulars		L.F.	(Dr.) `	(Cr.) `
2021 31st Dec.	Param’s Capital A/c   To Profit and Loss Suspense A/c (Being loss transferred)	Dr.		15,000	15,000

Working Notes:

Sales for the year ended 31st March, 2021 was ` 12,00,000

Loss for the year ended 31st March, 2021 was ` 90,000

Percentage of Loss for the year ended 31st March, 2021 was 90,000 × 100 ÷ 12,00,000 = 7.5 %

Sales for the nine months ended 31st December, 2021 was ` 6,00,000.

Param’s share of Loss for the nine months ended 31st December, 2021 was ` 6,00,000 × 7.5 ÷ 100 = 15,000

 

Pass the necessary Journal entry to record Bhuwan’s share of profit/loss up to the date of death.

 

Date	Particulars		L.F.	(Dr.) `	(Cr.) `
2021 30st Sep.	Bikram’s Capital A/c (WN-1)   To Profit and Loss Suspense A/c (Being loss transferred)	Dr.		1,20,000	1,20,000
30st Sep.	Profit and Loss Suspense A/c (WN-2) To Akhil’s Capital A/c To Charu’s Capital A/c (Being loss transferred)			1,20,000	36,000 84,000
	Or (Alternative Journal Entry)
30st Sep.	Bikram’s Capital A/c (WN-1)   To Akhil’s Capital A/c (WN-2)   To Charu’s Capital A/c (WN-2) (Being loss transferred)	Dr.		1,20,000	36,000 84,000

 

Working notes:

WN-1

Loss from the beginning of the accounting year till the date of death was estimated at ` 3,60,000

Bikram’s Share of Loss till the beginning of the accounting year till the date of death ` 3,60,000 × 2/6 = 1,20,000

WN-2

Old share of Akhil is 3/6 and Charu is 1/6

Akhil and Charu New share future profits in the ratio of 3:2 w.e.f. 1st October, 2021.

Akhil = 3/6 - 3/5= 15-18/30=-3/30 (Gain)

Charu = 1/6 - 2/5= 5-12/30= -7/30 (Gain)

Gaining ratio of Akhil and Charu is 3:7

Akhinl = 1,20,000 × 3/10 = 36,000

Charu = 1,20,000 × 7/10 = 84,000

 

X, Y and Z were partners in a firm sharing profits in the ratio of 4 : 3 : 1. The firm closes its books on 31st March every year. On 1st February, 2021, Y died and it was decided that the new profit-sharing ratio between X and Z will be equal. Partnership Deed provided for the following on the death of a partner:
(a) His share of goodwill be calculated on the basis of half of the profits credited to his account during the previous four completed years. The firm's profits for the last four years were:
 

Year	2017	2018	2019	2020
Profits ( `)	1,50,000	1,00,000	50,000	1,00,000

(b) His share of profit in the year of his death was to be computed on the basis of average profit of past two years.
Pass necessary Journal entries relating to goodwill and profit to be transferred to Y's Capital Account.

 

Journal
Date	Particulars		L.F.	Debit  ( `)	Credit  ( `)
2021
Feb 1	Z’s Capital A/c	Dr.		75,000
	To Y’s Capital A/c				75,000
	(Adjustment of Y’s share of Goodwill )
Feb 1	Z’s Capital A/c	Dr.		23,438
	To Y’s Capital A/c				23,438
	(Adjustment of Y’s share of Profit)

 

Working Notes:

WN1: Calculation of Gaining Ratio

X :Y :Z=4:3:1(Old ratio)

X :Z=1:1(New ratio)

Gaining Ratio = New Ratio - Old Ratio

X's Gain=1/2−4/8=4−4/8=0

Z's Gain=1/2−1/8=4−1/8=3/8

X:Z=0:3

WN2: Calculation of Retiring Partner’s Share of Goodwill
Y's share of goodwill=4,00,000×3/8×1/2=` 75,000

Y's share of goodwill will be brought by Z only.

WN3: Calculation of Retiring Partner’s Share of Profit

Y's share of profit=75,000×3/8×10/12=` 23,438

Average profit for last two years=` 75,000

 

Iqbal and Kapoor are in partnership sharing profits and losses in 3 : 2. Kapoor died three months after the date of the last Balance Sheet. According to the Partnership Deed, the legal heir is entitled to the following:
(a) His capital as per the last Balance Sheet.
(b) Interest on above capital @ 3% p.a. till the date of death.
(c) His share of profits till the date of death calculated on the basis of last year's profits.
His drawings are to bear interest at an average rate of 2% on the amount irrespective of the period.
The net profits for the last three years, after charging insurance premium, were  ` 20,000;  ` 25,000 and  ` 30,000 respectively. Kapoor's capital as per Balance Sheet was  ` 40,000 and his drawings till the date of death were  ` 5,000.
Draw Kapoor's Capital Account to be rendered to his representatives.

 

Kapoor’s Account
Dr.		Cr.
Particulars	`	Particulars	`
Drawings A/c	5,000	Balance b/d	40,000
Interest on Drawings A/c	100	Interest on Capital A/c	300
Balance c/d	38,200	Profit and Loss Adjustment A/c	3,000
	43,300		43,300

 

Working Notes

 

WN1 Calculation of Interest on Capita of Kapoor till date of his death

Interest	= capital ×Rate100×time /12
	=40,000×3/100×3/12 =300

WN2 Calculation of Share of Profit of Kapoor till date of his death

Profit	= last years’ profit ×time /12×share of profit
	=30,000×3/12×3/5 =3,000

WN3 Calculation of Interest on Drawings
 

Interest	= Drawing ×2%
	=5,000×2% =100

Pass necessary Journal entries for the above transactions in the books of the firm. (CBSE 2020)

 

Date	Particulars		L.F.	(Dr.) `	(Cr.) `
	Saleem’s capital A/c Raheem’s capital A/c   To Kareem’s capital A/c (Being Kareem’s Sacrifice compensated)	Dr. Dr. Dr.		60,000 45,000	1,05,000
	P&L Suspense  A/c   To Kareem’s capital A/c (Being Profit transferred to capital accounts till the date death)	Dr.		22,500	22,500
	Kareem’s capital A/c   To Kareem’s Executor’s A/c  (Being Kareem’s capital A/c has been transferred Kareem’s Executor’s A/c)	Dr.		7,35,000	7,35,000

 

Working notes:

WN-1 Calculation of goodwill

The goodwill of the firm was valued at ` 3,50,000

Karim’s Share of Goodwill = 3,50,000×3/10 = ` 1,05,000

Goodwill Share of Karim is in Goodwill will be compensated by Saleem and Raheem in 4:3

Saleem = 1,05,000× 4/7 = 60,000

Raheem = 1,05,000× 3/7 = 45,000

 

WN-2 Karim’s share of Profit till the date of death

The average profits = 1,70,000+1,30,000+1,90,000 +1,10,000/4=1,50,000

Karim’s share of Profit = ` 1,50,000×3×6/10×12=22,500