Simar, Tanvi, and Umara were partners in a firm sharing profits and losses in the ratio of 5 : 6 : 9. On 31st March, 2024, their Balance Sheet was as follows:
Balance Sheet of Simar, Tanvi, and Umara as at 31st March, 2024
Liabilities | Amount (₹) | Assets | Amount (₹) |
Capitals: | | Fixed Assets | 25,00,000 |
Simar | 13,00,000 | Stock | 10,00,000 |
Tanvi | 12,00,000 | Debtors | 8,00,000 |
Umara | 14,00,000 | Cash | 7,00,000 |
General Reserve | 7,00,000 | Profit and Loss A/c | 2,00,000 |
Trade Payables | 6,00,000 | | |
Total | 52,00,000 | Total | 52,00,000 |
Umara died on 30th June, 2024. The partnership deed provided for the following on the death of a partner:
- Goodwill of the firm be valued at 3 years purchase of average profits for the last 5 years. The profits/losses for the previous four years were:
- 2022-23: ₹ 3,10,000 (loss)
- 2021-22: ₹ 3,00,000 (profit)
- 2020-21: ₹ 4,00,000 (profit)
- 2019-20: ₹ 2,50,000 (profit)
- Umara’s share of profit or loss till the date of her death was to be calculated on the basis of profit or loss for the year ended 31st March 2024.
- Calculate Goodwill of the firm.
- Pass the necessary journal entry for the treatment of goodwill on Umara’s death.
- Calculate Umara’s share in the profit or loss of the firm till the date of her death.
- Pass the necessary journal entry to record Umara’s share of profit or loss till the date of her death.