Chapter

Death of a Partner
Q 1. A and B are in partnership sharing profits and losses in the ratio of 3 : 2. B dies three months after the date of the
last Balance sheet. According to the partnership deed. B’s legal representatives are entitled to the following payments:
(a) His capital as per the last Balance sheet.
(b) Interest on above capital at 6 per cent per annum to date of death.
(c) His share of profit to date of death calculated on the basis of last year’s profits.
His drawings are to bear interest at an average rate of 2% on the amount irrespective of period. B’s capital as per the
last Balance Sheet was Rs. 40,000 and his drawings to date of death were Rs. 5,000. the last year’s profit was Rs.
30,000. Draw B’s account to be rendered to his legal representatives
Q2. P, Q and R were partners sharing profits and losses in the ratio of 5:3:2. respectively. On 31st December, 2005 their
Balance sheet stood as under:

Liabilities Rs. Assets Rs.

Sundry Creditors 27,500 Goodwill 12,500
Reserve Fund 15,000 Leasehold 50,000
Capital A/cs: Patents 15,000
P 75,000 Machinery 75,000
Q 62,500 Stock 25,000
R 37,500 1,75,000 Debtors 20,000
Cash at Bank 20,000
2,17,500 2,17,500
R died on 1st May, 2006. It was agreed that:
(a) Goodwill be valued at 2½ years’ purchase of average of last four years’ Profits which were: 2002 – Rs. 32,500, 2003
– Rs. 30,000, 2004 – Rs. 40,000 and 2005 – Rs. 37,500.
(b) Machinery be valued at Rs. 70,000; Patents be valued at Rs. 20,000; Leasehold be valued at Rs. 62,500 on 1st May,
2006.
(c) For the purpose of calculating R’s share in the profits of 2006, the profits in 2006 should be taken to have accrued
on the same scale as in 2005.
(d) A sum of Rs. 10,500 to be paid immediately to the executors of R and the balance to be paid in four equal half-yearly
instalments together with interest @ 10% interest per annum.
Pass the necessary Journal entries to record the above transactions and R’s executor’s account
Q 3. The Balance Sheet of X, Y, Z as on 31st December, 2005 was as follows:

Liabilities Rs. Assets Rs.

Bills Payable 2,000 Cash at Bank 5,800
Employees Prov. Fund 5,000 Bills Receivable 800
Workmen Com. Res. 6,000 Stock 9,000
General Reserve 6,000 Sundry Debtors 16,000
Loans 7,100 Furniture 2,000
Capital A/cs: Plant & Machinery 6,500
X 22,750 Buildings 30,000
Y 15,250 Advertisement Suspense 6,000
Z 12,000 50,000
76,100 76,100
The profit-sharing ratio was 3 : 2 : 1. Z died on 30 th April, 2006 the Partnership Deed provides that:
(a) Goodwill is to be calculated on the basis of 3 years’ purchase of the five years’ average profits. The profits were:
2005 Rs. 24,000, 2004 Rs. 16,000, 2003 Rs. 20,000, 2002 Rs. 10,000, 2001, Rs. 5,000.
(b) The deceased partner to be given share of profits upto the date of death on the basis of profits for the previous year.
(c) The Assets have been revalued as under:
Stock Rs. 10,000; Debtors Rs. 15,000; Furniture Rs. 1,500; Plant and Machinery Rs. 5,000; Building Rs. 35,000. a
bill for Rs. 600 was found worthless.
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(d) A sum of Rs. 12,233 was paid immediately to Z’s executors and the balance to be paid in two equal annual instalments
together with interest at 10% per annum on the amount outstanding.
Give Journal entries and show to Z’s Executor’s Account till it is finally settled.
Q 4. Arti, Bharti and Seema are partners sharing profits in the proportion of 3 : 2 : 1 and their Balance Sheet on March
31, 2003 stood as follows:
BALANCE SHEET
as at March 31, 2003
Liabilities Rs. Assets Rs.
Bills Payable 12,000 Buildings 21,000
Creditors 14,000 Cash in Hand 12,000
General Reserve 12,000 Bank 13,700
Capitals: Debtors 12,000
Arti 20,000 Bills receivable 4,300
Bharti 12,000 Stock 1,750
Seema 8,000 40,000 Investment 13,250
78,000 78,000
Bharti Died on June 12, 2003 and according to the deed of the said partnership her executors are entitled to be paid as
under:
(i) The capital to her credit at the time of her death and interest thereon @ 10% per annum.
(ii) Her proportionate share of reserve fund.
(iii) Her share of profits for the intervening period will be based on the sales during that period, which were calculated
as Rs. 1,00,000. the rate of profit during past three years had been 10% on sales.
(iv) Goodwill according to her share of profit to be calculated by taking twice the amount of the average profit of the
last three years less 20% The profits of the previous year were:
2001 Rs. 8,200
2002 Rs. 9,000
2003 Rs. 9,800
The investments were sold for Rs. 16,200 and he executors were paid out. Pass the necessary journal entries and write
the account of the executors of Bharti:
Q 5. A, B and C are sharing profits in the ratio of 2 : 2: 1. B dies on 31st March, 2007. Accounts are closed on 31st
December. Sales for the year 2006 amounted to Rs. 3,00,000. Sales of Rs. 1,00,000 amounted between the period from
1st January, 2007 to 31st March, 2007. The profits for the year 2006 amounted to Rs. 30,000.
Calculate the deceased partner’s share in the profits of the firm.
Q 6.A, B and S were partners in SGTI Ltd. sharing profits in the ratio of 3 : 2 : 1. B died on June 30,
2019.Share of profits for the intervening period will be based on the sales during that period. Sales were
calculated as Rs. 1,20,000. The rate of profit during past three years had been 10% on sales. Calculate
deceased partners share in profit pass journal entries for the same. Firm closes its books on March 31 every
year.

Q 7. A , B and C are partners P.S.R. 2 : 2 : 1. C died on 30th September,2019. His share of profit upto his
date of death on the basis of sales till date of death. Sales for the year ended March 31,2019 was Rs.2,00,000
and profit for the same year was 10% on sales. Sales shows a growth trend of 20% and percentage of profit
earning is reduced by 1%. Pass journal entry forC’s share of profit.

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Q 8. X, Y and Z were partners in a firm sharing profits and losses in the ratio of 3:2:1. Z died on 31st Jan, 2014. The
Balance Sheet of the firm as at that 31st March 2013:

Liabilities Rs. Assets Rs.

X’s Capital A/c 1,20,000 Plant and Machinery 1,20,000
Y’s Capital A/c 80,000 Furniture and fittings 75,000
Z’s Capital A/c 40,000 Investments 20,000
X’s Current A/c 8,000 Stock-in-Trade 32,000
Y’s Current A/c 2,500 Sundry Debtors 25,000
Reserve 30,000 Bills Receivable 11,000
Bills Payable 17,000 Cash at Bank 11,000
Sundry Creditors 20,000 Cash in Hand 18,500
Z’s Current A/c 5,000
3,17,500 3,17,500
The following decisions were taken by the remaining partners:
(a) A Provision for Doubtful Debts is to be raised at 5% on Debtors.
(b) While Plant and Machinery to be depreciated by 10%, Furniture and Stock-in-Trade are to be appreciated by
5% and 10% respectively.
(c) Advertising Expenses Rs. 2,100 are to be carried forward to the next accounting year and, therefore, it is to be
adjusted through the Revaluation Account
(d) Goodwill of the firm is valued at Rs. 30,000.
(e) The Fixed Capital Method is to be converted into the Fluctuating Capital Method by transferring the Current
Account balance to the respective Partners’ Capital Accounts.
(f) Previous year profit was Rs. 60,000.
(g) Interest on Capital to be allowed @ 12% p.a., Salary to each partners 100 per Month.
(h) Z is to be paid Rs. 27,633 immediately and balance in 3 equal annual installment together with Interest @ 12%
per annual.
Prepare the Revaluation Account and Partners’ Capital Accounts.
Q 9. In the partnership agreement between X, Y and Z who were sharing profits 4 : 2 : 2, the goodwill was to be valued
on the death of any partner on the basis of such partner’s share of 2 years’ profits calculated on the average of 5 years’
profits immediately preceding the year of death less 10%. The firm’s profits were Rs. 30,000 in 2001, Rs. 50,000 in
2002, Rs. 80,000 in 2003 and loss of Rs. 10,000 in 2004 and Rs. 4,000 in 2005. the deceased partner’s share of profits
for the period of his lifetime in the year of death was to be based on the average of the profits of the previous 3 years
plus 10%.
X died on 31st May, 2006. His Capital Account showed a credit of Rs. 20,000 on 1st January, 2006 and he had drawn
Rs. 3,000 since that date. Show the amount of Goodwill and the share of profits payable to him.

NIRAJ JHA CLASSES 9999800978