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Capital Accounts of Puneet, Pankaj, Pammy

The document outlines the financial details and agreements regarding the partnership of A, B, and C, as well as Puneet, Pankaj, and Pammy, following the deaths of partners B and Pammy. It includes the balance sheets, profit-sharing ratios, goodwill calculations, and the treatment of capital accounts and executor accounts for the deceased partners. The document provides specific instructions for valuing assets, calculating profits, and settling amounts due to the executors.

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hritika.shyamsunder
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57 views3 pages

Capital Accounts of Puneet, Pankaj, Pammy

The document outlines the financial details and agreements regarding the partnership of A, B, and C, as well as Puneet, Pankaj, and Pammy, following the deaths of partners B and Pammy. It includes the balance sheets, profit-sharing ratios, goodwill calculations, and the treatment of capital accounts and executor accounts for the deceased partners. The document provides specific instructions for valuing assets, calculating profits, and settling amounts due to the executors.

Uploaded by

hritika.shyamsunder
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

A, B and C are partners in a firm sharing profits in the ratio of 5 : 3 : 2 respectively.

Their Balance
Sheet as at 31st March, 2023 was as follow:

Balance Sheet as at 31st March, 2023

Liabilities ₹ Assets ₹

Creditors 12,000 Cash 13,000

Reserves 4,000 Debtors 8,000

Workmen
Compensation 6,000 Stock 10,000
Reserve

Capitals:
30,000
A
20,000 Machinery 30,000
B
15,000
C

Buildings 20,000

Patents 6,000

87,000 87,000

On 1st October, 2023, due to illness B died, AS per the agreement:

(i) Goodwill is to be valued at two year’s purchase of the average profits of previous five years, which
were : 2019 – ₹ 10,000; 2020 – ₹ 13,000; 2021 – ₹ 12,000; 2022 – ₹ 15,000 and 2023 – ₹ 20,000.

(ii) Patents were valued at ₹ 8,000; Machinery at ₹ 28,000 and Buildings at ₹ 30,000.

(iii) B’s share of profit till the date of his death will be calculated on the basis of profit of the year
2023.

(iv) Interest on capital will be provided at 10% p.a.

(v) Amount due to B’s executors will be transferred to Charity Account.

Prepare B’s Capital Account to be presented to his executors.

Puneet, Pankaj and Pammy are partners in a business, sharing profits and losses in the ratio of
2:2:1, respectively. Their balance sheet as on March 31, 2017, was as follows:
Books of Puneet, Pankaj and Pammy

Balance Sheet as on March 31, 2017

Liabilities Amount Assets Amount

₹ ₹

Sundry Creditors 1,00,000 Cash at Bank 20,000

Capital Accounts: Stock 30,000

Puneet 60,000 Sundry Debtors 80,000

Pankaj 1,00,000 Investments 70,000

Pammy 40,000 2,00,000 Furniture 35,000

Reserve 50,000 Buildings 1,15,000

3,50,000 3,50,000

Mr Pammy died on September 30, 2017. The partnership deed provided the following:

(i) The deceased partner will be entitled to his share of profit up to the date of death calculated on the
basis of the previous year’s profit.

(ii) He will be entitled to his share of goodwill of the firm calculated on the basis of 3 years’ purchase of
an average of the last 4 years’ profit. The profits for the last four financial years are given below: for
2013–14, ₹ 80,000; for 2014–15, ₹ 50,000; for 2015–16, ₹ 40,000; for 2016–17, ₹ 30,000.

The drawings of the deceased partner up to the date of death amounted to ₹ 10,000. Interest on
capital is to be allowed at 12% per annum.

Surviving partners agreed that ₹ 15,400 should be paid to the executors immediately and the balance
in four equal yearly instalments with interest at 12% p.a. on the outstanding balance.

Show Mr Pammy’s Capital account, and his Executor’s account, till the settlement of the amount due.

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