Question

Anita, Sunita and Kavita were partners in a business sharing Profits and Losses in the ratio of 2:2:1 respectively. Their Balance Sheet as on 31st March 2019 is as under.

On 1st July 2019 Kavita died and the following adjustment were made:

1. All the Debtors were considered as good.

2. A contingent liability for a compensation of ₹900 was provided.

3. Investment were sold out in the market at 10% profit.

4. Loan were paid off.

5. Land and Building were depreciated by ₹800 and Furniture by ₹1100.

6. Goodwill of the firm was valued at ₹15000. It was to be raised in the Books.

7. Kavita was entitled to get her share in the profit upto the date of her death. Profit for 2019-20 was estimated at ₹10,000.

8. The amount due to Kavita’s executors was paid by NEFT.

Prepare: Revaluation Account, Partners Capital Account, Balance sheet of new firm.

Answer 1

Working Note:

1. Calculation of Kavita’s share in the profit till the date of her death. Kavita died on 1st July 2019. Profit for 2019-20 is estimated at ₹10,000

Kavita’s share in it for 3 months is ₹10,000 × \(\frac 3 {12}\) × \(\frac 15\) = ₹500

2. Kavita’s Executors loan account was fully paid, hence it is not transferred to liability side.