# 12th | Ts grewal 2022-2023 Question 21 to 25 | Death of A Partner

Question 21: Raman, Param and Karan were partners sharing profits and losses in the ratio of 3:2:1. Param died on 31st December, 2021. Accounts of the firm are closed on 31st March every year. Sales for the year ended 31st March, 2021 was ` 12,00,000 and sales for the nine months ended 31st December, 2021 was ` 6,00,000.

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

Question 22: Akhil, Bikram and Charu were partners sharing profits and losses in the ratio of 3:2:1. Bikram died on 30th September, 2021. Loss from the beginning of the accounting year till the date of death was estimated at ` 3,60,000. Akhil and Charu decided to share future profits in the ratio of 3:2 w.e.f. 1st October, 2021.

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

#### Question 23:

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

#### Question 24:

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

Question 25: Karim, Saleem and Raheem were partners in a firm sharing profits and losses in the ratio of 3:4:3. The firm closes its books on 31st March every year. On 1st October, 2019, Karim died. On Karim’s death, the goodwill of the firm was valued at ` 3,50,000. Karim’s share in the profits of the firm in the year of his death was to be calculated on the basis of average profits of last four years. The profits for the last four years were 2015-16- ` 1,70,000; 2016-17- ` 1,30,000;2017-18- ` 1,90,000 and 2018-19- ` 1,10,000.The total amount payable to Karim’s executors on his death was ` 7,35,000. It was paid on 15th October, 2019.

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

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