Question

Saurabh, Reena and Deepak were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. Saurabh died on 31st December, 2024. As per the partnership deed, Saurabh’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 ₹ 10,00,000 and that from 1st April, 2024 to 31st December, 2024 amounted to ₹ 7,50,000.
The profit for the year ending 31st March, 2024 was calculated as ₹ 5,00,000. The books of accounts are closed on 31st March every year.
Calculate Saurabh’s share in the profit of the firm till the date of his death.
Pass necessary journal entry for the same. Show your working clearly.

Hint:

When profit up to date of death is to be calculated based on sales, compute the sales ratio, apply it to last year’s profit, and then credit the deceased partner’s capital account.

Answer 1

Step 1: Profit to be apportioned (based on sales)
Total sales for 2023–24 = ₹ 10,00,000
Profit for 2023–24 = ₹ 5,00,000
So, profit as a percentage of sales = \[ \frac{₹5,00,000}{₹10,00,000} \times 100 = 50% \] Sales till death (1 April – 31 Dec 2024) = ₹ 7,50,000
Profit up to date of death = \[ 50% \times ₹ 7,50,000 = ₹ 3,75,000 \] Step 2: Saurabh's share in profits (Ratio 5 : 3 : 2)
Saurabh’s share = \( \frac{5}{10} \times ₹ 3,75,000 = ₹ 1,87,500 \) Step 3: Journal Entry \[ \text{Profit and Loss Suspense A/c Dr. ₹ 1,87,500}
\hspace*{10pt} \text{To Saurabh’s Capital A/c ₹ 1,87,500} \] Narration: Being Saurabh’s share of profit credited till the date of his death based on sales.