Question

Piyush, Aadi and Sudha were partners in a firm sharing profits and losses in the ratio of 4 : 3 : 3. Aadi died on 1st October, 2024. As per the partnership deed, Aadi’s share of profit or loss till the date of death was to be calculated on the basis of sales. Sales for the year ended 31st March, 2024 amounted to ₹ 6,00,000 and that from 1st April to 30th September, 2024 amounted to ₹ 2,00,000. The profit for the year ending 31st March, 2024 was calculated as ₹ 1,50,000. The books of accounts are closed on 31st March every year. Calculate Aadi’s share of profits in the firm and pass necessary journal entries for the same. Show your working clearly.}

Hint:

In case of partner’s death, profit is estimated using past performance ratios and allocated till date of death.

Answer 1

Annual sales: ₹ 6,00,000
Profit for the year: ₹ 1,50,000
Profit to sales ratio = \( \frac{1,50,000}{6,00,000} = 25% \)
Sales till Aadi’s death: ₹ 2,00,000
Estimated profit till Aadi’s death = 25% of ₹ 2,00,000 = ₹ 50,000
Aadi’s share = 3/10 × ₹ 50,000 = ₹ 15,000
Journal Entry:
Profit and Loss Suspense A/c Dr. ₹ 15,000
To Aadi’s Capital A/c ₹ 15,000