Question

P, Q and R were partners in a firm. Their Balance sheet as at 31st March, 2017 was as follows :

The partnership deed provides that the profit be shared in the ratio 2:1:1 and that in the event death the partner, his executors will be entitled to be paid out:

1. The capital to his credit at the date of balance sheet,
2. His proportion of reserve at the date of balance sheet,
3. His proportion of profits of the last 3 years plus 10% and
4. By way goodwill, his proportion of the total profit for the three preceding years.
5. Share in profit on revaluation of building which is Rs 4,000.
6. The net profit of last 3 years are Rs 15,000, Rs 16,000 and Rs 17,000.

R died on 30th June, 2017. He had withdrawn Rs 5,000 upto the date of his death. The investment were sold at par and R’s executors were paid off. Prepare Partners’ Capital Account, R’s Executor’s Account and Balance Sheet of surviving partners P and Q.

Answer 1

(2) Share in profit = 10% Adding in last three year average profit

(3) Profit of Rs. 1,100 is shown in assets side as a individed profit in Balance sheet