Solution

DEATH OF A OARTNER
Class 12 - Accountancy

1. DATE PARTICULARS L.F. Dr. (₹) Cr. (₹)

2021 Aug. 31 Profit & Loss Suspense A/c Dr. 1,00,000
To L's Capital A/c 1,00,000
(Being L's share of profit is credited to her a/c)
Working Notes:
7,00,000
i. Average Profit = 5,00,000 + 2
= 6,00,000
ii. L's Share of Profit = 6, 00, 000 × = 1,00,000
2 5
×
5 12

2. Working Note:
Total Goodwill = ₹ 10,300 + ₹ 15,100 + ₹ 13,600 = ₹ 39,000
B's share of Goodwill = 39,000 × 38 = ₹ 14,625
B's share of Goodwill will be adjusted to A's Capital Account.
REVALUATION ACCOUNT
Dr. Cr.
Particulars ₹ Particulars ₹
To Debtors (Bad Debts) 2,000 By Fixed Assets 20,000
To Provision for Bad Debts 900 By Prepaid Insurance 490
To Provision for Discount 342 By Typewriter 4,000
To Outstanding salaries 3,000
To Profit: A's Capital A/c 11,405
B's Capital A/c 6,843
24,490 24,490
B's CAPITAL ACCOUNT
Dr. Cr.
Particulars ₹ Particulars ₹
To Goodwill (Written off) 5,625 By Balance b/d 40,200

To B's Executor’s A/c - Balance transferred 59,643 By Workmen Compensation Reserve (Note 2) 3,600

By A’s Capital A/c (Share of Goodwill) 14,625

By Revaluation A/c 6,843

65,268 65,268
Note (2): Since there is no claim against Workmen’s Compensation Reserve B's share in this reserve is credited to his account.
3. i. Shilpi's share in profits will be calculated for (1 April to 30 June) 3 months
Shilpi's share in profits = ₹ 60,000 × 5 × 12 = ₹ 6,000
2 3

ii. Journal Entries

Date Particular L.F. Dr. (₹) Cr. (₹)
1. Madhu's Capital A/c Dr. 8,000 -
Renuka's Capital A/c Dr. 4,000 -
To Shilpi's Capital A/c - 12,000
(Being goodwill compensated by gaining partners)
2. Profit & Loss Suspense A/c Dr. 6,000 -
To Shilpi's Capital A/c - 6,000
(Being share of profit transferred to retiring partner's capital A/c)
4. JOURNAL
Date Particulars Dr. Amount (₹) Cr. Amount (₹)
2019 Nov. 1 Kartik’s Capital A/c Dr. 30,000
Tina’s Capital A/c Dr. 20,000

1 / 20
 To Aditi’s Capital A/c 50,000
(Deceased partner’s share of goodwill transferred to her capital A/c)
" Profit and Loss Suspense A/c Dr. 28,000
To Aditi’s Capital A/c 28,000
(Aditi’s share of profit till the date of death credited to Aditi’s Capital A/c)
" Aditi’s Capital A/c Dr. 3,78,000
To Aditi’s Executors A/c 3,78,000
(Balance in Aditi’s capital A/c transferred to her Executors A/c)
" Aditi’s Executors A/c Dr. 1,89,000
To Cash A/c 1,89,000
(Aditi’s Executors were paid half of the amount due to them)
5. Taniya's Capital Account
Particulars Amount (₹) Particulars Amount (₹)
To Drawings A/c 20,000 By Balance b/d 3,00,000
To Taniya's Executors A/c 4,52,500 By General Reserve A/c 20,000
By Salary A/c 12,500
By Akshay's Capital A/c 80,000
By Radha's Capital A/c 40,000
By Profit & Loss Suspense A/c 20,000
4,72,500 4,72,500
Working Notes:-
i. Calculation of Goodwill:-
(1,00,000+1,50,000+2,00,000)
Average Profit =
3

Average Profit = ₹ 1,50,000

Average Profits of the last three years
Goodwill of the firm =
Number of Years' Purchase
Goodwill of the firm = ₹ 1,50,000 × 2
Goodwill of the firm = ₹ 3,00,000
Taniya's share of goodwill = ₹ 3,00,000 × 5
2

Taniya's share of goodwill = ₹ 1,20,000

ii. Calculation of Taniya's Share of Profit
Last Year's profit = ₹ 2,00,000
Profit till the date of death = ₹ 2,00,000 × 12 = ₹ 50,000
3

Taniya's Share of Profits = ₹ 50,000 × 2 = ₹ 20,000

5

6. JOURNAL
Amount Amount
Date Particulars LF
(Dr.) (Cr.)
2015, Sep
Manav's Capital A/c (1,90,000 × 1 / 2) Dr. 95,000
30
Narayan's Capital A/c (1,90,000 × 1/2 ) Dr. 95,000
To Nath's Capital A/c 1,90,000
(Being Nath's share of goodwill adjusted in the capital accounts of gaining partners
in gaining ratio)
Manav's Capital A/c (30,000×1 / 4) Dr. 7,500
Nath's Capital A/c (30,000×2 / 4) Dr. 15,000
Narayan's Capital A/c (30,000×1 / 4) Dr. 7,500
To Profit and Loss A/c 30,000
(Being the transfer of profit to old partners in old ratio)

Profit and Loss Suspense A/c ( 90,000 ×2 / 4 x ) Dr. 22,500

6

12

To Nath's Capital A/c 22,500

2 / 20
 (Being Nath's share of profit till the date of his death transferred to his capital
account)
Nath's Capital A/c Dr. 1,92,500
To Nath's Executor A/c 1,92,500
(Being the transfer of amount due to Nath's executor account)
Working Notes:
1. Calculation of Nath’s Share of Goodwill:
Firm’s goodwill = Rs 3,80,000; Nath’s share of goodwill = 3,80,000× 2 = Rs 1,90,000; Goodwill Amount Rs. 1,90,000 will be
4

debited to Gaining Partners in their gaining ratio which is 1:1 for Manav and Narayan. Hence Manav's capital acount and
Narayana's Capital Account will be debited by 95,000 each.
2. Calculation of Profit and loss suspense account: Nath's share in Profit up to date of death - 90,000x6/12x2/4 = 22,500.
3. Calculation of Amount Transferred to Nath’s Executors Account
Nath's Capital Account
Dr Cr
Particulars Amount (Rs.) Particulars Amount (Rs.)
To Balance b/d 5,000 By Manav's Capital A/c 95,000
To Profit and Loss A/c 15,000 By Narayan's Capital A/c 95,000
To Nath's Executor A/c 1,92,500 By Profit and Loss Suspense A/c 22,500
2,12,500 2,12,500

7. DATE PARTICULARS L.F. Dr. (₹) Cr. (₹)

2021
June 30 Profit & Loss Suspense A/c Dr. 16,000
To Ramesh's Capital A/c 16,000
(Being Ramesh's share of profit is credited to his a/c)
Working Notes:
i. Profit % of PY = = 10%
1,20,000
× 100
12,00,000

ii. Ramesh's share of profit = 4, 00, 000 × = 16,000

10 2
×
100 5

8. JOURNAL
Date Particulars L.F. Dr. (₹) Cr. (₹)
2023
June Profit and Loss Suspense A/c(1) Dr. 16,000
24
To Y's Capital A/c 16,000
(Y's share of profit till the date of death)
" X's Capital A/c Dr. 32,000
Z's Capital A/c Dr. 16,000
To Y's Capital A/c 48,000
(Y's share of goodwill adjusted into the Capital A/cs of X and Z in their gaining ratio of 2 :
1)
" Y's Capital A/c Dr. 1,75,000
To Y's Executor's A/c 1,75,000
(Y's Capital A/c transferred to his Executor’s A/c)
July 15 Y's Executor's A/c Dr. 1,75,000
To Bank A/c 1,75,000
(Amount paid to Y's Executors)
Working Notes:
1. Calculation of Y's Share of Profit:
Profit ( Last Year )
i. Ratio of Profit to Sales = × 100
Sales ( Last Year )
= = 20%
3,00,000
× 100
15,00,000

3 / 20
 ii. Profit upto the date of death = 2,00,000 × 20
= ₹ 40,000
100

iii. Y's Share of Profit = 40,000 × = ₹ 16,000

2

9. VARSHA'S CAPITAL ACCOUNT

Dr. Cr.
Particulars ₹ Particulars ₹
To Drawings A/c 15,000 By Balance b/d 75,000

To Varsha’s Executors A/c 1,66,250 By General Reserve A/c (₹ 30,000 × ) 10,000

1

By Profit & Loss Suspense A/c (WN 1) 10,000

By Varsha's Salary A/c (₹ 25,000 × 1

4
) 6,250

By Kirti's Capital A/c (WN 2) 40,000

By Babita's Capital A/c (WN 2) 40,000
1,81,250 1,81,250
Working Notes:
i. Calculation of Varsha's Share of Profit:
₹ 1,20,000+₹ 90,000+₹ 1,50,000
Average profit = 3
= ₹ 1,20,000
Varsha's share of profit till the date of death = ₹ 1,20,000 × 3

12
×
1

3
= ₹ 10,000.
ii. Calculation of Varsha's share of Goodwill:
Firm's Goodwill = Average Profit × No. of year's Purchase = ₹ 1,20,000 × 2 = ₹ 2,40,000
Varsha's Share of Goodwill = ₹ 2,40,000 × 3 = ₹ 80,000, which is contributed by Kirti and Babita in their gaining ratio of 1 : 1.
1

10. DATE PARTICULARS L.F. Dr. (₹) Cr. (₹)

2021 July 1 Profit & Loss Suspense A/c Dr. 10,000
To Riya's Capital A/c 10,000
(Being Riya's share of profit is credited to her a/c)
Working Notes:
i. Average profit = 60,000 + 50,000 + 90,000 + 80,000 + = 80,000
1,20,000

ii. Riya share of profit = 80, 000 × 3

6
×
3

12
= 10,000
11. In The Books Of Firm
Journal Entries
Debit Credit
Particulars L.F.
(₹) (₹)
Workmen's Compensation Reserve A/c Dr. 6,000
To X's Capital A/c 3,000
To Y's Capital A/c 2,000
To Z's Capital A/c 1,000
(Workmen's Compensation Reserve distributed among old partners in their old profit sharing
ratio)

General Reserve A/c Dr. 6,000

To X's Capital A/c 3,000
To Y's Capital A/c 2,000
To Z's Capital A/c 1,000
(general Reserve distributed among old partners in their old profit sharing ratio)

X's Capital A/c Dr. 3,000

Y's Capital A/c Dr. 2,000
Z's Capital A/c Dr. 1,000
To Advertisement Suspense A/c 6,000
(advertisement Suspense Written off among old partners in their old profit sharing ratio)

X's Capital A/c Dr. 4,500

4 / 20
Y's Capital A/c Dr. 3,000
To Z's Capital A/c 7,500
(Z's Share of goodwill adjusted through gaining ratio)

Revaluation A/c Dr. 3,600

To Sundry debtors A/c 1,000
To Furniture A/c 500
To Plant and Machinery A/c 1,500
To Bills Receivable A/c 600
(decrease in value of Assets transferred to Revaluation Account)

Stock A/c Dr. 1,000

Building A/c Dr. 5,000
To Revaluation A/c 6,000
(increase in value of Assets transferred to Revaluation Account)

Revaluation A/c Dr. 2,400

To X's Capital A/c 1,200
To Y's Capital A/c 800
To Z's Capital A/c 400
(revaluations profit distributed among old partners in their old profit sharing ratio)

Profit and Loss Suspense A/c Dr. 1,333

To Z's Capital A/c 1,333
(Z's share of profit transferred his capital account)

Z's Capital A/c Dr. 22,233

To Z's Executor's A/c 22,233
(amount due to Z transferred to his Executor's Account)

Z's Executor's A/c Dr. 12,333

To Bank A/c 12,333
(amount due paid to Z's Executor)
Z's Executor's Account
Dr. Cr.
Date Particulars ₹ Date Particulars ₹
2023 July 31 To Bank A/c 12,233 2023 July 31 By Z's Capital A/c 22,233
2024 Mar 31 To Balance c/d 10,667 2024 Mar 31 By Interest A/c (10,000 × 10% for 8 months) 667
22,900 22,900
2024 July 31 To Bank A/c (5,000 + 667 + 333) 6,000 2024 Apr 1 By Balance b/d 10,667
2024 July 31 By Interest A/c (10,000 × 10% for 4 months) 333
2025 Mar 31 To Balance c/d 5,333 2025 Mar 31 By Interest A/c (5,000 × 10% for 8 months) 333
11,333 11,333
2025 July 31 To Balance A/c (5,000 + 333 + 1667) 5,500 2025 Apr 1 By Balance b/d 5,333
2025 July 31 By Interest A/c (5,000 × 10% for 4 months) 167
5,500 5,500
W.N:
i. Goodwill = Average Profit × Number of Year's Purchase
∴ Goodwill = 15,000 × 3 = ₹ 45,000

Average Profit = = ₹ 15,000

24,000+16,000+20,000+10,000+5,000 75,000
=
5 5

ii. X:Y:Z = 3:2:1 (Old Ratio)

Gaining Ratio (X and Y) = 3:2

5 / 20
 Z's Goodwill = = 45, 000 × = ₹ 7,500
1

Z's share of goodwill is to be distributed between X and Y in their = 3:2 (Gaining Ratio)
X's = = 7, 500 × 35 = ₹ 4,500
Y's = 7, 500 × 2

5
= ₹ 3,000
iii. Profit for Past Year = ₹ 24,000
Z's Profit = 24, 000 × 6 × 12 = ₹ 1,333
1 4

iv. Revaluation Account

Dr. Cr.
Particulars ₹ Particulars ₹
To Sundry Debtors A/c 1,000 By Stock A/c 1,000
To Furniture A/c 500 By Building A/c 5,000
To Plant and Machinery A/c 1,500
To Bills Receivable A/c 600
To Revaluation Profit transferred to:
X's Capital A/c 1,200
Y's Capital A/c 800
Z's Capital A/c 400 2,400
6,000 6,000
12. PARTNER'S CAPITAL ACCOUNTS
Dr. Cr.
Particulars X (₹) Y (₹) Z (₹) Particulars X (₹) Y (₹) Z (₹)
To Y's Capital A/c 90,000 30,000 By Balance b/d 2,00,000 1,50,000 1,00,000
To Y's Executor's A/c 3,12,000 By Reserves A/c 45,000 30,000 15,000
To Balance c/d 1,55,000 85,000 By Profit & Loss Suspense A/c 12,000
By X's Capital A/c 90,000
By Z's Capital A/c 30,000
2,45,000 3,12,000 1,15,000 2,45,000 3,12,000 1,15,000
Y'S EXECUTOR'S ACCOUNT
Dr. Cr.
Particulars ₹ Particulars ₹
To Bank A/c 3,12,000 By Y's Capital A/c 3,12,000
BALANCE SHEET OF X AND Z
as at 1st August, 2023
Liabilities ₹ Assets ₹
Sundry Creditors 44,000 Stock 1,20,000
Bank Loan 40,000 Debtors 64,000
Capital Account Balances : X 1,55,000 Fixed Assets 1,28,000
Z 85,000 2,40,000 Profit & Loss Suspense A/c 12,000
3,24,000 3,24,000
W.N.:
i. Assessment of Y’s share of profit:
Total Profits for last three years = 80,000 + 1,30,000 + 1,50,000 = ₹ 3,60,000
3,60,000
Average Profits = 3
= ₹1, 20, 000
Profit from 1st April to 31st July, 2023 = 1, 20, 000 × 4
= ₹ 40,000
12

Y's share of profit = 40, 000 × 2

= ₹ 13,333
6

Less: 10% of 13,333 = ₹ 1,333

= 13,333 - 1,333 = ₹ 12,000
ii. Y's share of Goodwill
Total Profits of last three years = ₹ 3,60,000

6 / 20
 Y's share in profit (Goodwill) 3, 60, 000 × = ₹ 1,20,000
2

It will we contributed by X and Z in the ratio of 3 : 1

iii. BANK ACCOUNT
Dr. Cr.
Particulars ₹ Particulars ₹
To Balance b/d 22,000 By Y's Executor's A/c 3,12,000
To Investments A/c 2,50,000
To Bank Loan (B/f) 40,000
3,12,000 3,12,000
13. i. Calculation of Gaining Ratio:
B Gains = =
7 4 3
−
12 12 12

C Gains = =
5 3 2
−
12 12 12

Thus Gaining Ratio = 3 : 2

ii. Valuation of Goodwill:
Total Profit = 19,000 + 15,000 + 20,000 + 18,000 = ₹ 72,000
Average Profit = = ₹ 18,000
72,000

Hence, Goodwill at 2 12 years purchase = 18,000 × 2 12 = 45,000

A's share of Goodwill = 45,000 × = 18,750
5

12

It will be adjusted into the Capital Accounts of B and C in the gaining ratio of 3 : 2
iii. Share of profit payable to A (upto the date of death):
18,000 × = ₹ 3,750
6 5
×
12 12

This amount of ₹ 3,750 will be credited to A and debited to B and C in their gaining ratio of 3 : 2.
[Note : This amount of ₹ 3,750 should not be debited to Profit & Loss Suspense A/c because the profit sharing ratio of B and
C, in between them, does not remain the same. Profit Sharing Ratio between B and C has changed from 4 : 3 to 7 : 5.]
iv. REVALUATION ACCOUNT
Dr. Cr.
Particulars ₹ Particulars ₹
To Patents A/c 3,000 By Building A/c 5,000
To Machinery A/c 2,000
5,000 5,000
There is neither profit nor loss due to revaluation of assets.
A's CAPITAL ACCOUNT
Dr. Cr.
Particulars ₹ Particulars ₹

To Advertisement Suspense A/c (12,000 × ) 5,000 By Balance b/d 30,000

5

12

To A's Executor's A/c 51,500 By Reserve (6,000 × ) 2,500

5

12

By B's Capital A/c (Goodwill) (18,750 × ) 11,250

3

By C's Capital A/c (Goodwill) (18,750 × 2

) 7,500
5

By B's Capital A/c (Share of Profit) (3,750 × ) 2,250

3

By C's Capital A/c (Share of Profit) (3,750 × ) 1,500

2

By Interest on capital (30,000 × ) 1,500

10 6
×
100 12

56,500 56,500
A's EXECUTOR'S ACCOUNT
Dr. Cr.
Particulars ₹ Particulars ₹
To Bank A/c 25,750 By A's Capital A/c 51,500
To A's Executor's Loan A/c - Transfer 25,750
51,500 51,500
Note: It has been assumed that due to shortage of cash, bank overdraft of the required amount has been taken to make
payment to A’s Executor’s.

7 / 20
14. PARTNER'S CAPITAL ACCOUNTS
Dr. Cr.
Particulars P (₹) Q (₹) R (₹ Particulars P (₹) Q (₹) R (₹)
To R's Capital A/c (Share of
7,900 3,950 ____ By Balance b/d 15,000 10,000 10,000
Goodwill)
By Employee's Compensation Reserve
To Bank A/c ____ ____ 5,000 4,000 2,000 2,000
A/c
To R's Executors ____ ____ 22,936 By Contingency Reserve A/c 6,000 3,000 3,000
By Profit & Loss Suspense A/c (See Note
To Balance c/d 17,100 11,050 ____ ____ ____ 1,086
1)
By P's Capital A/c (Share of goodwill) ____ ____ 7,900
By Q's Capital A/c (Share of goodwill) ____ ____ 3,950
25,000 15,000 27,936 25,000 15,000 27,936
R'S EXECUTOR'S ACCOUNT
Dr. Cr.
Particulars ₹ Particulars ₹
To Bank A/c 22,936 By R's Capital Ac 22,936
22,936 22,936
BALANCE SHEET OF P AND Q
as at 1st July, 2023
Liabilities ₹ Assets ₹
Sundry Creditors 21,000 Buildings 26,000
Employee's Provident Fund 4,000 Debtors 15,000

Bank Loan(3) 6,936 Bills Receivable 6,000

Capitals: Stock 12,000

P 17,100 Profit & Loss Suspense A/c 1,086
Q 11,050 28,150
60,086 60,086
Working Notes:
i. Ascertainment of R's share of profit:
Total profits for the last years = ₹ 16,000 + ₹ 16,000 + ₹ 15,400 = ₹ 47,400
₹47,400
Average Profits = 3
= ₹15, 800
Profit (From 1st April 2023 to 1st July, 2023) = ₹15, 800 × = ₹ 3,950
3

12

R's share in Profit = ₹3, 950 × = ₹ 987

1

Add: 10% of ₹ 987 = ₹ 99

= ₹ 1,086
ii. R's Share of Goodwill:
Total profits for the three preceding years = ₹ 47,400
R's share of profit (Goodwill) = ₹ 47, 400 × 4 = ₹ 11,850
1

R's share of goodwill = ₹ 11,850, which is contributed by P and Q in the ratio of 2 : 1.

iii. Calculation of Bank Overdraft: ₹
Available Cash 6,000
(+) Received from sale of Investments 15,000
21,000
(-) Withdrew by R to the date of his death (Drawings) 5,000
16,000
(-) Amount required to pay off R's Executors 22,936
Overdraft Required 6,936
15. PRIYA'S CAPITAL A/C
Dr. Cr.

8 / 20
 Date Particulars ₹ Date Particulars ₹
2023 June 12 To Goodwill (Written off) 16,000 2023 April 1 By Balance b/d 1,20,000
2023 June 12 To Priya's Executor's A/c (Balance transferred) 1,82,720 2023 June 12 By Profit & Loss A/c 24,000

2023 June 12 By Interest on Capital(1) 1,920

2023 June 12 By Riya's Capital A/c(2) (Profit) 800

2023 June 12 By Siya's Capital A/c (Profit) 4,000

2023 June 12 By Riya's Capital A/c (Goodwill) 8,000
2023 June 12 By Siya's Capital A/c (Goodwill) 40,000
1,98,720 1,98,720
Priya's share ( 5 ) has been acquired by Riya and Siya in the ratio of 1 : 5
2

Riya will gain 1

6
of 2

5
=
1

15

Siya will gain of

5 2 1
=
6 5 3

Hence, Riya's new share =

1 1 3+1 4
+ = =
5 15 15 15

Siya's new share =

2 1 6+5 11
+ = =
5 3 15 15

New Ratio of Riya and Siya = 4 : 11

Working Notes:
i. Interest on Capital:
Number of days from March 31 to June 12 = 73
Interest on Capital = 1, 20, 000 × 100 × 365 = ₹ 1,920
8 73

ii. Share of Profit:

30,000+70,000+80,000
Average Profit = 3
= ₹ 60,000
Priya's share up to the date of death = 60, 000 × = ₹ 4,800
73 2
×
365 5

Note: This amount of ₹ 4,800 will be credited to Priya and debited to Riya and Siya in their gaining ratio of 1 : 5. It should not
be debited to Profit & Loss Suspense Account because the profit sharing ratio of continuing partners, in between them, does
not remain the same.
iii. Valuation of Goodwill:
Goodwill = Average Profit × 2
Goodwill = 60,000 × 2 = ₹ 1,20,000
Priya's share = 1, 20, 000 × 5 = ₹ 48,000
2

Riya and Siya have gained in the ratio of 1 : 5

Hence, amount of goodwill debited to Riya = 48, 000 × = ₹ 8,000
1

amount of goodwill debited to Siya = 48, 000 × = ₹ 40,000

5

16. Revaluation Account

Amount Amount
Particulars Particulars
(Rs.) (Rs.)
To provision for Doubtful debts 10,000 By Stock 10,000
To Furniture 5,000 By Building 50,000
To Plant & Machinery 15,000
To Bill Receivable 6,000
To Profits transferred to
P’s capital A/c 12,000
Q’s capital A/c 8,000
R’s capital A/c 4,000 24,000
60,000 60,000
====== =======
R’s Capital A/c
Amount Amount
Date Particulars Date Particulars
(Rs.) (Rs.)

30.4.13 To Advertisement Suspense A/c (30, 000 × 5,000 1.1.13 By Balance b/d 1,20,000
1
)
6

To R’s Executor A/c 2,22,333 By workmen Compensation reserve 15,000

By Revaluation A/c 4,000

9 / 20
 By P’s Capital A/c (goodwill) 45,000
By Q’s capital A/c (goodwill) 30,000
By P&L Suspense A/c 13,333
2,27,333 2,27,333
======= ======
R’s Executor Account
Amount Amount
Date Particulars Date Particulars
(Rs.) (Rs.)
3.4.13 To Bank A/c 72,333 30.4.13 By R’s capital A/c 2,22,333
By interest A/c
31.12.13 To Balance c/d 1,60,000 31.12.13 8 10,000
(10% on 1, 50, 000 × )
12

2,32,333 2,32,333
======= =======
30.4.14 To Bank A/c 75,000 + 15,000 90,000 1.1.14 By Balance b/d 1,60,000
By interest A/c
31.12.14 To Balance c/d 80,000 30.4.14 10,000
5000
10 4
( × 1, 50, 000 × )
100 12

1,70,000 1,70,000
======= =======
30.4.15 To Bank A/c 75,000 +7,500 82,500 1.1.15 By Balance b/d 80,000
By interest A/c
30.4.15 10 2,500
( × 75, 000 × 4)
100

82,500 82,500
====== =======
On the death of a partner, the accounting treatment regarding goodwill, revaluation of assets and reassessment of liabilities,
accumulated reserves and undistributed profit are similar to that of the retirement of a partner, When the partner dies the
amount payable to him/her is paid to his/her legal representatives. The representatives are entitled to the followings : (a) The
amount standing to the credit to the capital account of the deceased partner (b) Interest on capital, if provided in the
partnership deed upto the date of death: (c) Share of goodwill of the firm; (d) Share of undistributed profit or reserves; (e) Share
of profit on the revaluation of assets and liabilities; (f) Share of profit upto the date of death; (g) Share of Joint Life Policy.
Working Note:
Average Profit = 2,40,000 + 1,60,000 + 2,00,000 + 1,00,000 + 50,000 = Rs. 1,50,000 Goodwill = RS.1, 50, 000 × 3 = Rs. 4,50,000
R’s share = 4, 50, 000 ×
1
Rs.75, 000
6

Contribution by P&Q in ratio 3:2

P’s share = 5 × 75000 = 45000 Q’s share Rs. 30,000
3 2
× 75, 000
5

R’s share of profits = 2, 40, 000 × = Rs. 13,333

4 1
×
12 6

17. IN THE BOOKS OF THE FIRM

JOURNAL ENTRIES
Date Particulars L.F. Dr. (₹) Cr. (₹)
2023 Nov.
Interest on Capital A/c Dr. 960
5
To N's Capital A/c
960
(Interest credited to N's Capital Account)

2023 Nov.
Reserve A/c Dr. 1,800
5
To N's Capital A/c
1,800
(Transfer of N's share of Reserves to N's Capital Account)

2023 Nov.
Profit & Loss Suspense A/c Dr. 7,200
5
To N's Capital A/c
7,200
(Transfer of th share of profit i.e. ₹ 2,40,000 × )
2 15 2
×
10 100 10

2023 Nov.
L's Capital A/c Dr. 3,375
5

10 / 20
 M's Capital A/c Dr. 2,025
To N's Capital A/c
(Adjustment of N's share of goodwill into the Capital Accounts of L and M in their gaining 5,400
ratio i.e., 5 : 3)

2023 Nov.
Bank A/c Dr. 12,000
5
To Investment A/c
12,000
(Sale of Investments through bank balance)

2023 Nov.
N's Capital A/c Dr. 35,360
5
To N's Executor's A/c
35,360
(Amount due to N transferred to his Executor's Account)

2023 Nov.
N's Executor's A/c Dr. 35,360
5
To Bank A/c
35,360
(Amount paid to N's Executors through bank)
N'S CAPITAL ACCOUNT
Dr. Cr.
Date Particulars ₹ Date Particulars ₹
2023 Nov. 5 To N's Executor's A/c 35,360 2023 April 1 By Balance b/d 20,000
2023 Nov. 5 By Interest on Capital A/c 960
2023 Nov. 5 By Reserves A/c 1,800
2023 Nov. 5 By Profit & Loss Suspense A/c 7,200
2023 Nov. 5 By L's Capital A/c 3,375
2023 Nov. 5 By M's Capital A/c 2,025
35,360 35,360
N'S EXECUTOR'S ACCOUNT
Dr. Cr.
Date Particulars ₹ Date Particulars ₹
2023 Nov. 5 To Bank A/c 35,360 2023 Nov. 5 By N's Capital A/c 35,360
W.N.:
i. Number of days from April 1, 2023 to Novemeber 5, 2023 = 219
Interest on Capital = 20, 000 × 219
×
8
= ₹ 960
365 100

ii. Average Profit = = 12,000

10,500+12,000+12,500+13,000

Less: 25% of 12,000 = 3,000

= 12,000 - 3,000 = 9,000
Goodwill = 9,000 × 3 = ₹ 27,000
N's share of Goodwill = 27, 000 × 2

10
= ₹ 5,400
It will be credited to the Capital Account of L and M in their gaining ratio 5 : 3.
18. i. Balance Sheet of the firm will have to be prepared in order to ascertain the Capitals of the partners.
BALANCE SHEET
Liabilities ₹ Assets ₹
Capital Account (Balancing figure) 1,20,000 Cash 10,000

A 1, 20, 000 × = 60,000 Debtors 20,000

5

10

B 1, 20, 000 × = 36,000 Furniture 18,000

3

10

C 1, 20, 000 × 10
2
= 24,000 Machine 72,000

1,20,000 1,20,000
ii. Goodwill = 21,000 × 2 = 42,000
B's share of Goodwill = 42, 000 × = ₹ 12,600
3

10

B's share of Goodwill will be adjusted into the capital account of A and C in the gaining ratio of 5 : 2.

11 / 20
 iii. Interest on B's Drawings:
On ₹ 600 for 6 months 3,600 Products
On ₹ 600 for 5 months 3,000 Products
On ₹ 600 for 4 months 2,400 Products
On ₹ 600 for 3 months 1,800 Products
On ₹ 600 for 2 months 1,200 Products
On ₹ 600 for 1 months 600 Products
12,600
Interest = 12, 600 × 6

100
×
1

12
= ₹ 63
B's CAPITAL A/C
Dr. Cr.
Particulars ₹ Particulars ₹
To Drawings 3,600 By Balance b/d 36,000
To Interest on drawings 6% on ₹ 3,600 for 3 2 average months 63 By Interest on Capital 900
1

To B's Executor's A/c - Balance transferred 49,437 By Profit & Loss Suspense A/c 3,600
By A's Capital (Goodwill) 9,000
By C's Capital (Goodwill) 3,600
53,100 53,100
19. Books of Manu, Naresh and Paras
Paras’s Capital A/c
Dr. Cr.
Amount Amount
Particulars Particulars
₹ ₹
To Paras’s Executor’s A/c 1,55,000 By Balance b/d 70,000
By General Reserve A/c 20,000
By Manu’s Capital A/c (goodwill) 5,000
By Naresh’s Capital A/c (goodwill) 5,000
By Profit &Loss Suspense 48,000
By Interest on Capital A/c 7,000
1,55,000 1,55,000
Paras’s Executor’s A/c
Dr. Cr.
Amount Amount
Particulars Particulars
₹ ₹
To Bank A/c 77,500 By Paras's Capital A/c 1,55,000
To Balance c/d
Paras’s Executor’s Loan A/c 77,500
1,55,000 1,55,000
20. Dr. Revaluation A/c Cr.
In the books of Ratan, Singh and Sharma
Dr. Cr.
Particulars Amount(₹) Particulars Amount(₹)
To Plant and Machinery A/c 50,000 By Land and Building A/c 49,500
By Provision for bad debts A/c 500
50,000 50,000
Partners’ Capital A/c
Dr. Cr.
Particulars Ratan (₹) Singh (₹) Sharma (₹) Particulars Ratan (₹) Singh (₹) Sharma (₹)

12 / 20
 To Profit and loss A/c 40,000 40,000 20,000 By Balance b/d 3,60,000 2,40,000 1,00,000
To Sharma's capital A/c 30,000 30,000 By General Reserve A/c 1,20,000 1,20,000 60,000
To Bank/Cash A/c 2,00,000 By Ratan's capital A/c 30,000
To Balance c/d 4,50,000 4,50,000 By Singh's capital A/c 30,000
By Bank A/c 40,000 1,60,000
5,20,000 5,20,000 2,20,000 5,20,000 5,20,000 2,20,000
21. Journal
Debit Credit
Date Particulars L/F Amount Amount
(Rs.) (Rs.)
X's Capital A/c
Y's Capital A/c Dr. 10,938
2010 July 31 17,500
To Z's Capital A/c Dr. 6,562
(Being Z’s share of goodwill compensated by the existing partners)
Profit and Loss of Suspense A/c
To Z's Capital A/c Dr. 2,500 2,500
(Being Z’s share of profit till the date of death)
Revaluation A/c
To Machinery A/c Dr. 5,000 5,000
(Being decrease in the value of machinery recorded)

Patents A/c
Building A/c Dr. 5,000
17,500
To Revaluation A/c Dr 12,500
(Being assets revalued)
Revaluation A/c
To X's Capital A/c 6,250
To Y's Capital A/c Dr. 12,500 3,750
To Z's Capital A/c 2,500
(Being profit transferred to Partner’s Capital Accounts)
Z's Capital A/c
To Z's Executor's A/c Dr. 60,000 60,000
(Being net amount due to Z transferred to his Executors’ A/c)
Z's Executor's A/c
To Bank A/c Dr. 17,500 17,500
(Being partly cash paid to executors)
An executor account is an account which allows the executor(s) to gather payments due to the deceased's estate before being
distributed to the beneficiaries, such as the proceeds from the sale of a [Link] collect the deceased person's cash assets and
to have a way to pay the bills, you'll need a bank account for estate funds. Here's how it works. Once you have been appointed
executor by the probate court, you'll probably want to open a bank account in the name of the estate.
Z's Executor's Account
Amount Amount
Date Particulars Date Particulars
(Rs.) (Rs.)
2010 July 31 To Bank 17,500 2010 July 31 By Z Capital 's A/c 60,000
2011 Jan 31 To Bank(10,625 + 2,550) 13,175 2011 Jan. 31 By Interest on Loan 2,550
To Balance c/d 31,875
62,550 62,550
======= ======
Working Notes:
The partnership capital account is an equity account in the accounting records of a partnership. It contains the following types
of transactions. Profits and losses earned by the business, and allocated to the partners based on the provisions of the
partnership agreement. Distributions to the partners.
Z’s Capital Account
Amount Amount
Date Particulars Date Particulars
(Rs.) (Rs.)
To Z's Executor's A/c 60,000 By Balance b/d 37,500

13 / 20
 By Profit and Loss Suspense A/c 2,500
By Revaluation A/c 2,500
By X's Capital A/c 10,938
By Y's Capital A/c 6,562
60,000 60,000
======= ======
22. Journal
Date Particulars L.F. Dr.(Rs.) Cr.(Rs.)
2010 June 30 Reserve Fund A/c(3,200 x 1/4) Dr. 800
To C's Capital A/c
800
(Being a share of reserve fund transferred to C’s Capital A/c)
June 30 Interest on Capital A/c Dr. 62.50
To C's Capital A/c
62.50
(Being interest on capital credited to C’s Capital A/c)
June 30 A's Capital A/c Dr. 2,334
B's Capital A/c Dr. 1,166
To C's Capital A/c
3,500
(Being C’s share of goodwill adjusted through the capital A/Cs)
June 30 P & L Suspense A/c Dr. 437.50
To C's Capital A/c
437.50
(Being C’s share in profit transferred to his capital A/c)
June 30 C's Capital A/c Dr. 9,800
To C's Executor's A/c
9,800
(Being the balance of C’s Capital A/c transferred to his executor’s A/c)
July 01 C's Executor's A/c Dr. 1,800
To Bank A/c
1,800
(Being payment made to C’s executor)
or we can pass entry like this
June 30 Reserve Fund A/c(3,200 x 1/4) Dr. 800
Interest on Capital A/c Dr. 62.50
A's Capital A/c Dr. 2,334
B's Capital A/c Dr. 1,166
P & L Suspense A/c Dr. 437.50
To C's Capital A/c 4,800
( being all adjustment are transferred in C's capital)
C's Capital Account
Dr. Cr.
Date Particulars Amt(Rs.) Date Particulars Amt(Rs.)
2010 June 30 To C's Executor's A/c 9,800 2010 April 01 By Balance b/d 5,000
June 30 By Interest on Capital A/c(w.n i) 62.50
June 30 By P & L Suspense A/c(w.n ii) 437.50
June 30 By A's Capital A/c(w.n iii) 2,334
June 30 By B's Capital A/c(w.n iii) 1,166
June 30 By Reserve Fund A/c(3,200 x 1 /4) 800
9,800.00 9,800,00
C’s Executor’s Account
Dr. Cr.
Date Particulars Amt(Rs.) Date Particulars Amt(Rs.)
2010 July 1 To Bank A/c 1,800 2010 June 30 By C's Capital A/c 9,800

14 / 20
 Dec. 31 To Bank A/c(2,667 + 400) 3,067 Dec. 31 By Interest A/c 400
Dec. 31 To Balance c/d 5,333
10,200 10,200
Working Notes :
i. Interest on Cs Capital = = Rs. 62.50
5,000×5×3

100×12

ii. C’s share in profit = 7.000 × = Rs. 437.50

3 1
×
12 4

iii. Valuation of goodwill

Total profit of 3 years = 5,000 + 9,000 + 7,000 = 21,000
21,000
iv. average profit = 3
= Rs. 7,000
Value of goodwill = 2 ×7,000 = 14,000
C’s share in goodwill = 14000 × 14 = Rs. 3,500 i.e to be divided in gaining ratio b/w partners
A : Rs 3,500 × 2 = Rs. 2,334
3

v. B : Rs 3,500× 1 = Rs. 1,166

3

vi. journal entry will be

vii. Date Particular L.F Dr Cr

A 's capital a/c dr 2,334
B's capital a/c dr 1,166
To C's capital a/c 3,500
( being goodwill given to deceased partner )
23. One major change in the constitution of a partnership firm may occur if a partner undergoes retirement from the firm or in the
event of his death. In both cases, the partner’s account will have to be settled, and new ratios will have to be calculated. There is
also the issue of treatment of goodwill. The following are the important adjustments:
Adjustment for revaluation of assets and liabilities
New profit sharing ratio and gaining ratio
Adjustment of partner's capital
Treatment of goodwill
i. Calculation of B's Share of Goodwill
5 years total profit = (-) 70,000 + 70,000 + 60,000 + 50,000 + 40,000 = ₹ 1,50,000
Average profit = = ₹ 30,000
1,50,000

Firm's Goodwill = Average Profit × Number of Years' Purchase = 30,000 × 3 = ₹ 90,000

B's share of goodwill = 90,000 × 10
5
= ₹ 45,000, to be contributed by C and D in their gaining ratio of i.e, 3 : 2. C will contribute
= 45,000 × 35 = ₹ 27,000; D will contribute = 45,000 × 25 = ₹ 18,000
ii. Calculation of B's Share of Profit
B's share in loss = ₹ 70,000 × 10 = ₹ 8,750 (Dr)
5 3
×
12

B's Capital Account

Amount
Date Particulars Amount (₹) Date Particulars
(₹)
2023
To Profit and Loss A/c(70,000 × 10 ) 35,000 2023 April 1 By Balance b/d 40,000
5

June 30
June 30 To Profit and Loss Suspense A/c (Loss) 8,750 June 30 By General Reserve A/c (70,000× 10 ) 35,000
5

June 30 To B's Executor's A/c 76,250 June 30 By C's Capital A/c 27,000
June 30 By D's Capital A/c 18,000
1,20,000 1,20,000
24. Revaluation Account
Particulars ₹ Particulars ₹
Trade Marks 7,200 Land and Buildings 9,600
Plant 14,400 Loss transferred to Partners’ Capital A/cs:
Raj 3,600
Kamal 6,000
Mohit 2,400 12,000
21,600 21,600
Kamal’s Capital Account

15 / 20
 Dr. Cr.
Date Particulars ₹ Date Particulars ₹
To Advt. Suspense A/c (12, 000 × 5

10
) 6,000 By Balance b/d 69,600

To Revaluation A/c (Loss) 6,000 By Interest on Capital A/c (WN1) 3,480

To Kamal’s Executor’s A/c (Bal. Fig.) 1,10,080 By General Reserve A/c (16, 000 × 5
) 8,000
10

By Raj’s Capital A/c (WN2) 19,200

By Mohit’s Capital A/c (WN2) 12,800
By P&L Suspense A/c (WN3) 9,000
1,22,080 1,22,080
Kamal’s Executor’s Account
Dr. Cr.
Date Particulars ₹ Date Particulars ₹
Bank A/c 60,080 Kamal’s Capital A/c 1,10,080
Kamal’s Executor’s Loan A/c (Bal. Fig.) 50,000
1,10,080 1,10,080
Working Notes:
i. Calculation of Interest on Capital
Interest = ₹ 69,600× 12
6
×
10

100
= ₹ 3,480
ii. Calculation of Goodwill
31,200+28,800+36,000
Average Profit = 3
= ₹ 32,000
Goodwill = 32,000 × 2 = ₹ 64,000
Kamal's Share of Goodwill = 64,000 × 10
5
= ₹ 32,000
(Contributed by Raj and Mohit in the ratio 3 : 2)
iii. Calculation of Kamal’s Profit Share
Profit = 36,000 × 10 × 12 = ₹ 9,000
5 6

25. REVALUATION ACCOUNT

Dr. Cr.
Particulars ₹ Particulars ₹
To Plant & Machinery A/c 2,000 By Land & Building A/c 34,000
To Stock A/c 2,000
To Provision for doubtful Debt A/c
300
(12,000x5/200)
To Profit Transfer to
Yogesh's Capital A/c 20,790
Ram's Capital A/c 5,940
Sumit's Capital A/c 2,970 29,700
34,000 34,000
PARTNERS'CAPITAL ACCOUNTS
Dr. Cr.
Particulars Yogesh Ram Sumit Particulars Yogesh Ram Sumit
To Goodwill A/c 28,000 8,000 4,000 By Balance b/d 70,000 20,000 10,000
To Ram’s Executor’s A/c ____ 59,060 ____ By General Reserve A/c 14,000 4,000 2,000
To Balance c/d (WN 2 76,790 ____ 10,970 By Revaluation A/c 20,790 5,940 2,970
By Profit & Loss Suspense A/c (WN 1 ____ 7,120 ____
By Loan from Ram A/c ____ 30,000 ____
1,04,790 67,060 14,970 1,04,790 67,060 14,970
Ram's EXECUTOR'S ACCOUNT
Dr. Cr.
Particulars ₹ Particulars ₹

16 / 20
 To Ram's Executors' Loan A/c 59,060 By Ram's Capital A/c 59,060
59,060 59,060
BALANCE SHEET OF Yogesh and Sumit
as at 24th August, 2023
Liabilities ₹ Assets ₹
Capital A/c- Land and Building 94,000
Yogesh 76,790 Machinery 38,000
Sumit 10,970 87,760 Stock 5,000
Creditor’s A/c 14,000 Debtors 12,000
Ram's Executors' Loan A/c 59,060 Less: Provision for Doubtful Debt 300 11,700
Cash 5,000
Profit & Loss Suspense A/c 7,120

1,60,820 1,60,820
Working Notes:
1. Calculation of Ram's share of net profit up to 24th August for 146 Days (30 + 31 + 30 + 31 + 24): Ram's share of estimated
profit = ₹ 80,000 × = ₹ 6,400. Interest on Loan by Ram up to the date of death = ₹ 30,000 × 6% × = ₹ 720.
146 2 146
×
365 10 365

2. Calculation of total capital of new firm after Ram's death:

Particulars ₹
Adjusted old capital of Yogesh (₹ 70,000 + ₹ 14,000 + ₹ 20,790 - ₹ 28,000) 76,790
Adjusted old capital of Sumit (₹ 10,000 + ₹ 2,000 + ₹ 2,970 - ₹ 4,000) 10,970
Total capital of new firm 87,760
CALCULATION OF CURRENT ACCOUNT BALANCE
Particulars Yogesh (₹) Sumit (₹)
(a) New capital (₹ 87,760 in the ratio of 7:1) 76,790 10,970
(b) Adjusted old capital 76,790 10,970
(c) Current Account balance (a - b) Nil Nil
26. In the books of M, N and O
JOURNAL
Date Particulars L/F Dr. (₹) Cr. (₹)

2023
June General Reserve A/c (30,000 × 1
) Dr. 10,000
3

12
To N's Capital A/c
10,000
(Being share of general reserve given to N)

Interest on Capital A/c Dr. 700

To N's Capital A/c
700
(Being share of general reserve given to N)

M's Capital A/c (60,000 × 1

2
) Dr. 30,000

O's Capital A/c (60,000 × ) Dr. 30,000

1

To N's Capital A/c

60,000
(Being amount of goodwill adjusted in gaining ratio)

Profit and Loss Suspense A/c Dr. 12,000

To N's Capital A/c
12,000
(Being N's share of profit transferred to his capital account)

17 / 20
 N's Capital A/c Dr. 1,52,700
To N's Executor's A/c
1,52,700
(Being amount due to N transferred to N's executor's account)
N's Capital A/c
Date Particulars Amount (₹) Date Particulars Amount (₹)

2023 June 12 To N's Executor's Account A/c 1,52,700 2023 By Balance b/d 70,000
June 12 By General Reserve A/c 10,000
June 12 By Interest on Capital A/c 700
June 12 By M's Capital A/c 30,000
June 12 By O's Capital A/c 30,000

June 12 By Profit and Loss Suspense A/c (Profit) 12,000

1,52,700 1,52,700
Working Notes:
Whenever a partner exits a partnership, the books of accounts of such a firm have to be settled. The outgoing partner or his
legal representatives have to be paid their dues. This means a revaluation of assets and liabilities must be done. Goodwill is to
be calculated at average profit method and interest on capital is also to be calculated.
i. Calculation of Interest on N's Capital
Interest on N's capital = 70, 000 × 5 × 73
= ₹ 700
100 365

ii. Calculation of Goodwill

3 years total profit = 80,000 + 90,000 + 1,00,000 = ₹ 2,70,000
Average profit = = ₹ 90,000
2,70,000

Firm's Goodwill = Average profit × Number of Year's Purchase = 90,000 × 2 = ₹ 1,80,000

N's share of goodwill = 1, 80, 000 × 13 = ₹ 60,000
iii. Calculation on N's Share of Profit
N's share of profit = (90,000 × 2)× 73

365
×
1

3
= ₹ 12,000
27. Pammy’s Capital Account
Dr. Cr.
Particulars Amount ₹ Particulars Amount ₹
To Drawings 10,000 By Balance b/d 40,000
To Pammy Executor’s A/c 75,400 By Profit and Loss (Suspense) 3,000
By Puneet’s Capital A/c 15,000
By Pankaj’s Capital A/c 15,000
By Interest on Capital 2,400
By Reserve 10,000
85,400 85,400
Pammy’s Executor Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
2017-18 2017-18
Sep. 30 To Bank 15,400 Sep. 30 By Pammy’s Capital A/c 75,400
Mar. 31 To Balance c/d 63,600 Mar. 31 By Interest 3,600
79,000 79,000
2018-19 2018-19
Sep. 30 To Bank 22,200 April 01 By Balance b/d 63,600
(15,000 + 3,600 + 3,600) Sep. 30 By Interest 3,600
Mar. 31 To Balance c/d 47,700 Mar. 31 By Interest 2,700
69,900 69,900
2019-20 2019-20
Sep. 30 To Bank 20,400 April 01 By Balance b/d 47,700

18 / 20
 Mar. 31 To Balance c/d 31,800 Sep. 30 By Interest 2,700
Mar. 31 By Interest 1,800
52,200 52,200
2020-21 2020-21
Sep. 30 To Bank 18,600 April 01 By Balance b/d 31,800
(15,000 + 1,800 + 1,800) Sep. 30 By Interest 1,800
Mar. 31 To Balance c/d 15,900 Mar. 31 By Interest 900
34,500 34,500
2021-22 2021-22
Sep. 30 To Bank 16,800 April 01 By Balance b/d 15,900
(15,000 + 900 + 900) Sep. 30 By Interest 900
16,800 16,800
Working Notes:
i. Pammy’s Share of Profit
Previous Year’s × Profit Proportionate × Period Share of Deceased Partner = 30,000 × = 3,000
6 1
×
12 5

ii. Pammy’s Share of Goodwill

Goodwill of the firm = Average Profit ´ Numbers of Year’s Purchase
Average Profit = = = 50,000
80,000+50,000+40,000+30,000 2,00,000

4 4

Goodwill of the firm = 50,000 × 3 = ₹ 1,50,000

Pammy's share = 1,50,000 × 15 = 30,000
iii. Gaining Ratio = New Ratio – Old Ratio
Puneet’s Share = 24 - 25 = 20
2

Pankaj’s Share = 2

4
- 2

5
= 2

20

Gaining Ratio between Puneet and Pankaj = 2 : 2 or 1 : 1

iv. Interest on Capital for 6 months, i.e. from April 1, 2007 to September 30, 2007
Amount of Capital × Rate of Interest × Period = 40,000 × = 2,400
12 6
×
100 12

v. Interest Amount
The firm closes its books every year on March 31, while instalments to Pammy’s Executor are paid on September 30 every
year.
Amount outstanding on 30 September = 75,400 – 15,400 = ₹ 60,000
Calculation of Interest:
Periods Amount Oustanding Yearly Interest For 6 Months

2017-18 60,000 60,000 × = 7,200 7,200 × = 3,600

12 6

100 12

2018-19 45,000 45,000 × 12

100
= 5,400 5,400 ×
6

12
= 2,700

2019-20 30,000 30,000 × 12

= 3,600 3,600 ×
6
= 1,800
100 12

2020-21 15,000 15,000 × = 1,800 1,800 × = 900

12 6

100 12

28. IN THE BOOKS OF THE FIRM

JOURNAL ENTRIES
Date Particulars L.F. Dr. (₹) Cr. (₹)
2017
June 30 Profit and Loss Suspense A/c Dr. 1,500
To Sohan's Capital A/c 1,500
(Being the interest credited to Sohan's Capital Account up to 30th June
June 30 Ram's Capital A/c Dr. 25,000
Mohan's Capital A/c Dr. 25,000
To Sohan's Capital A/c 50,000
(Being Sohan's share of goodwill credited to his Capital Account)
June 30 Profit and Loss Suspense A/c Dr. 7,500
To Sohan's Capital A/c Dr. 7,500
(Being the share of profit credited)

19 / 20
June 30 Workmen Compensation Reserve A/c Dr. 75,000
To Ram's Capital A/c 30,000
To Mohan's Capital A/c 30,000
To Sohan's Capital A/c 15,000
(Being Workmen Compensation Reserve credited to Old Partners' Capital Accounts)
June 30 Sohan's Capital A/c Dr. 1,74,000
To Sohan's Executors' A/c 1,74,000
(Being the transfer of balance in Sohan's Capital Account to Sohan's Executors' Account) Dr.
July 1 Sohan's Executors' A/c Dr. 14,000
To Bank A/c 14,000
(Being the amount paid to Sohan's Executors)
SOHAN'S CAPITAL ACCOUNT
Dr. Cr.
Date Particulars ₹ Date Particulars ₹
2017 2017
June 30 To Sohan's Executors' A/c 1,74,000 April 1 By balance b/d 1,00,000
June 30 By Profit and Loss Suspense A/c 1,500

June 30 By Ram's Capital A/c 25,000

June 30 By Mohan's capital A/c 25,000
June 30 By Profit and Loss Suspense A/c 7,500
June 30 By Workmen Compensation Reserve A/c 15,000
1,74,000 1,74,000
SOHAN'S EXECUTORS' ACCOUNT
Dr. Cr.
Date Particulars ₹ Date Particulars ₹
2017 July 1 To Bank A/c 14,000 2017 June 30 By Sohan's Capital A/c 1,74,000
By Interest A/c
2018 March 31 To Balance c/d 1,67,200 2018 March 31 7,200
[(₹ 1,74,000 - ₹ 14,000) × 6
×
9
)
100 12

1,81,200 1,81,200
To Bank A/c
2018 June 30 89,600 2018 April 1 By Balance b/d 1,67,200
(₹ 80,000 + ₹ 7,200 + ₹ 2,400)
By Interest A/c
2018 June 30 2,400
(₹ 1,60,000 × 100 )
6 3
×
12

By Interest A/c
2019 March 31 To Balance c/d 83,600 2019 March 31 3,600
(₹ 80,000 × 100
6
×
9

12
)

1,73,200 1,73,200
To Bank A/c
2019 June 30 84,800 2019 April 1 By Balance b/d 83,600
(₹ 80,000 + ₹ 3,600 + ₹ 1,200)
By Interest A/c
2019 June 30 1,200
(₹ 80,000 × 6 ×
3
)
100 12

84,800 84,800
Notes:
i. Total amount due to Sohan's Executors ₹ 1,60,000 is payable in two equal annual installments. Therefore, yearly instalment =
₹ 1,60,000/2 = ₹ 80,000 plus interest.

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