Question

Ram, Ravi and Rohan were partners sharing profits in the ratio of 2:3:1. On 31st March, 2023, their Balance Sheet was as follows: Balance Sheet of Ram, Ravi and Rohan as on 31.3.2023 \begin{center} \begin{tabular}{|l|r|l|r|} Liabilities & Amount (\rupee) & Assets & Amount (\rupee)
Creditors & 3,62,000 & Cash & 14,000
General Reserve & 18,000 & Bank & 2,96,000
Capitals: & & Stock & 80,000
Ram & 1,00,000 & Debtors & 3,00,000
Ravi & 2,00,000 & Less: Provision for Doubtful Debts & (10,000)
Rohan & 3,00,000 & & 2,90,000
Total & 9,80,000 & Total & 9,80,000
\end{tabular} \end{center} Rohan died on 30th September, 2023. On the death of a partner the partnership deed provided for the following: Goodwill was to be valued at two years purchase of average profit of last three years. The profits for the last three years were: 2020-21 \rupee 45,000, 2021-22 \rupee 90,000, and 2022-23 \rupee 1,35,000. Deceased partner’s share of profit till the date of his death will be calculated on the basis of average profit of last three years. Prepare Rohan’s Capital Account to be rendered to his executors.

Hint:

Distribute goodwill and reserves among partners in their profit-sharing ratio, and calculate the deceased partner's share of profit for the period up to their death.

Answer 1

% Correct Answer Rohan’s Capital Account: \begin{center} \begin{tabular}{|l|r|r|} Date & Particulars & Amount (\rupee)
1st April, 2023 & Balance b/d & 3,00,000
30th September, 2023 & General Reserve (1/6 share) & 3,000
30th September, 2023 & Goodwill (1/6 share of \rupee 90,000) & 15,000
30th September, 2023 & Profit till date (1/6 of \rupee 67,500) & 11,250
30th September, 2023 & To Executors A/c & 3,29,250
Total & & 3,29,250
\end{tabular} \end{center} Workings: Goodwill: Average profit = \( \frac{45,000 + 90,000 + 1,35,000}{3} = 90,000 \)
Goodwill of firm = \( 90,000 \times 2 = 1,80,000 \)
Rohan's share = \( \frac{1}{6} \times 1,80,000 = 30,000 \). Profit till death: Average profit = 90,000
Profit till 30th September = \( 90,000 \times \frac{6}{12} = 45,000 \).
Rohan's share = \( \frac{1}{6} \times 45,000 = 7,500 \).