SSC BOARD PAPERS IMPORTANT TOPICS COVERED FOR BOARD EXAM 2024

### Death of partner

DEATH OF A PARTNER

Learning Objectives:

After studying this Unit, students will be able to understand and prepare:
a)     Deceased partners capital account
b)     Deceased partners Executor account
c)      Executors loan account
d)     Calculation of share of profit and Goodwill of the deceased partner.
SALIENT POINTS:
v Gaining Ratio: When the partner retires or dies, his share of profit is taken over by the remaining partners.
v Gaining ratio is applied for the purpose of  calculating Goodwill to be paid off to the deceased partner.
v The deceased partner s share of profit till the date of death will be calculated by preparing Profit and Loss Suspense account on the date of Death.

SHORT QUESTIONS--- (3-4 MKS)
1.     A,B and C are partners sharing profits and losses in the ratio of 5:4:1. The profit for the year ending 31, March, 2010 was Rs 1, 00,000. B died on 30th June 2010. Calculate C’s share of profit till the date of death and pass necessary journal entry.

 Profit and Loss suspense a/c – Dr       B’s Capital Account 10,000 10,000 (Being B’s share of profit transferred to his capital account)

C’s share of profit = 1,00,000 X 4/10 X 3/12 = 10,000

2.     X, Y and Z are partners in a firm sharing profits and losses in the ratio of 5:4:1.The Partnership agreement provides that the share of profit of the deceased partner will be worked out on the basis of sales. The sales for the year 2009-10 was Rs 8,00,000 and the sales from April 1, 2010 to June 30, 2010 was Rs 1,50,000. The profit for the year ended 31st  March 2010 amounted to Rs 1,00,000. Y died on 30th June 2010. Calculate his share of profit and pass necessary journal entry.

 Profit and Loss suspense a/c – Dr       Y’s Capital Account 7500 7500 (Being Y’s share of profit transferred to his capital account

Sales for the year 2009-10   ----8, 00,000       Profit for the year 2009-10    -----1,00,000
Sales from April 1,2010 to 30th June 2010 -----1,50,000   Profit upto 30th June 2010----?
C’s share of profit = 1,00,000/8,00,000 X 1,50,000 = 18750 X 4/10 = 7500.

3.  Ram, Mohan and Sohan were partners sharing profits and losses in the ratio of 5:3:2. On
31st March, 2006 their Balance Sheet was as under :

 Liabilities Rs Assets Rs Capitals Leasehold 1,25,000 Ram 1,50,000 Patents 30,000 Mohan 1,25,000 Machinery 1,50,000 Sohan 75,000 Stock 1,90,000 Workmen’s Compensation  Reserve 30,000 Cash at Bank 40,000 Creditors 1,55,000 5,35,000 5,35,000

Sohan died on 1st August, 2006. It was agreed that :
(i) Goodwill of the firm is to be valued at Rs. 1,75,000.
(ii) Machinery be valued at Rs. 1,40,000; Patents at Rs. 40,000; Leasehold at
Rs. 1,50,000 on this date.
(iii) For the purpose of calculating Sohan’s share in the profits of 2006-07, the profits
should be taken to have accrued on the same scale as in 2005-06, which were
Rs. 75,000.
Prepare Sohan’s Capital Account and Revaluation Account.                                      (6)
Revaluation Account
 Particulars Amt Particulars Amt Machinery 10,000 Leasehold 25000 Capital Accounts Patents 10,000 Ram 12500 Mohan 7500 Sohan 5000 35000 35000

Sohan’s capital Account
 Particulars Rs Particulars Rs Balance b/d 75000 Sohan’s Executor’s account 1,26,000 Revaluation a/c 5000 Ram’s Capital a/c 21875 Mohan’s capital a/c 13125 P & L Suspense A/c 13125 Workmen’s Compensation reserve a/c 6000 1,26,000 1,26,000

Working Note :
a)Total Goodwill of the firm = 1,75,000
Sohan’s share of goodwill = 1,75,000 X 2/10 = 35000 ( to be divided in the ratio of 5:3 i.e gaining ratio)
b) Sohan’s share of profit = 75000 X 4/12 x 2/10 = Rs 5000
4. Following is the Balance sheet of  P , Q and R as on 31st December 2010 sharing profits in the ratio of 5:3:2.
 Particulars Rs Particulars Rs Capital Accounts Cash 13000 P 30000 Debtors 8000 Q 25000 Machinery 30000 R 15000 Stock 10000 Creditors 7000 Patents 6000 Reserve Fund 10000 Building 20000 87000 87000

P died on 1st July 2011 on the following terms-
i)                Patents are to be valued at Rs 8000, Machinery at Rs 28000 and Building at Rs 30,000.
ii)              Interest on Capital is to be provided at 10% p.a.
iii)            Goodwill of the firm is valued at 2 years purchase of the average profits of the last five years which were-
2006  - Rs 15,000                   2007 – Rs 13000                  2008 – Rs 12,000               2009—15,000   and                      2010--- Rs 20,000
iv)             Profit for the year 2011 has been accrued on the same scale as in 2010.
v)               P’s Executor is to be paid Rs 11,500 and balance transferred to his loan account.
Prepare Revaluation Account, P’s Capital account and P’s executors account. Also pass necessary journal entries.

Revaluation Account
 Particulars Rs Particulars Rs Machinery 2000 Patents 2000 Capital Accounts- Buildings 10000 P 5000 Q 3000 R 2000 12000 12000

P’s Capital Account
 Particulars Rs Particulars Rs P’s Executors a/c 61500 Balance b/d 30000 Reserve fund 5000 Q’s Capital a/c 9000 R’s Capital  a/c 6000 Revaluation a/c 5000 Interest on capital 1500 61500 61500

P’s Executor’s account
 Particulars Rs Particulars Rs Bank/cash a/c 11500 P’s Capital a/c 61500 P’s Executor’s Loan a/c 50000 61500 61500

Working Note :

a)     Interest on Capital : 30,000 X 10/100 X 6/12 = Rs 1500
b)     Reserve fund = 10,000 X 5/10 = Rs 5000
c)     P’s Share of profits = 20,000 X 5/10 X 6/12 = Rs 5000.(for 6 months)
d)     Total Goodwill of the firm =
Average profits = 75000/5 = Rs 15000
Goodwill = 15000 X 2 = 30,000
P’s share of Goodwill = 30,000 X 5/10 = 15000(to be divided in Gaining ratio 3:2)
Journal
 SN Particulars LF Amt Amt 1 Revaluation a/c    ----Dr          Machinery a/c (Being machinery revalued) 2000 2000 2 Patents a/c    --Dr Building a/c  - Dr          Revaluation a/c (Being Assets revalued) 2000 10000 12000 3 Revaluation a/c --- Dr        P’s Capital a/c        Q’s Capital a/c        R’s Capital a/c (Being Revaluation  profit distributed) 10000 5000 3000 2000 4 Reserve fund a/c –Dr          P’s Capital a/c (Being reserve distributed) 5000 5000 5 Q’s Capital a/c ---Dr R’s Capital a/c ---Dr         P’s capital a/c (Being deceased partner ‘s account credited by his share of goodwill contributed by the gaining partners) 9000 6000 15000 6 Interest on capital a/c – Dr       P’s Capital a/c (Being Interest on capital provided to the deceased partner) 1500 1500 7 P’s Capital a/c ---Dr      P’s executor’s a/c (Being P’s balance due transferred to his executor’s a/c) 61500 61500 8 P’s executor’s a/c  --Dr        Cash a/c        P’s executor’s loan a/c (Being amount paid to the executor and balance transferred to his loan account) 61500 11500 50000

5. X, Y and Z are partners sharing profits and losses in the ratio of 2:2:1 respectively. Their Balance Sheet as on 31st march 2007 was as follows—
Balance Sheet as on 31/03/10
 Liabilities Rs Assets Rs Sundry Creditors 1,00,000 Cash at bank 20,000 Capital Accounts Stock 30,000 X 60,000 Sundry Debtors 80,000 Y 1,00,000 Investments 70,000 Z 40,000 Furniture 35,000 General Reserve 50,000 Buildings 1,15,000 3,50,000 3,50,000

Z died on 30th September 2007  and the following was provided—
a)     “Z” will be entitled to his share of profit upto the date of death based on last year’s profit.
b)     Z’s share of Goodwill will be calculated on the basis of 3 years purchase of average profits of last four years . The profits of the last four years was as follows—
Year  I – 80,000,      Year II –Rs 50,000         Year III – Rs 40,000 and Year IV –Rs 30,000
c)     Interest on Capital was provided at 12% p.a.
d)     Drawings of the deceased partner up to the date of death was Rs 10,000.
e)     Rs 15,400 should be paid immediately to the executor of the deceased partner and the balance in four equal yearly installments with interest at 12% on remaining balance.
Prepare Z’s capital account and Z’s executors account till the account is finally  closed.
Z’s Capital Account
 Particulars Rs Particulars Rs Drawings 10,000 Balance b/d 40,000 Z’s Executor’s a/c 75,400 General Reserve 10,000 Profit &Loss Suspense a/c 3,000 Interest on capital 2400 X’s Capital a/c 15,000 Y’s capital a/c 15,000 85400 85400

Z’s Executor’s Account
 Date Particulars Rs Date Particulars Rs. 30/09/07 Bank a/c 15400 30/09/07 Z’s Capital a/c 75400 31/03/08 Balance c/d 63600 31/03/08 Interest on Loan (on Rs 60,000@12% for 6 months) 3600 79000 79000 30/09/08 Bank a/c            ( 15000+ 7200) 22,200 1/04/08 Balance b/d 63600 31/03/09 Balance c/d 47,700 30/09/08 Interest on Loan(On Rs 60,000 @ 12% for 6 months) 3600 31/03/09 Interest on Loan(on Rs 45000 @12% for 6 months) 2700 69900 69900 30/09/09 Bank a/c (15000+5400) 20,400 1/04/09 Balance b/d 47,700 31/03/10 Balance c/d 31800 30/09/09 Interest on loan(on Rs 45000 @ 12% for 6 months) 2700 31/03/10 Interest on loan ( on Rs 30,000@12% for 6 months) 1800 52200 52200 30/09/10 Bank a/c(15000 + 3600) 18600 1/4/10 Balance b/d 31800 31/03/11 Balance c/d 15900 30/09/10 Interest on loan(on Rs 30,000 @12% for 6  months) 1800 31/03/11 Interest on Loan(on Rs 15000 @12% for 6 months) 900 34500 34500 30/09/11 Bank a/c (15000+1800) 16800 1/04/11 Balance b/d 15900 30/09/11 Interest on loan(on Rs 15000 @12% for 6  months) 900 16800 16800

6       Anil, Jatin and Ramesh  were sharing profit in the ratio of 2:1:1. Their Balance Sheet as at 31.12.2001  stood as follows:-
 Liabilities Rs Assets Rs Creditors 24,400 Cash 1,00,000 Bank Loan 10,000 Debtors    20000 Less : Provision 1600 18,400 Profit and Loss A/c 18,000 Stock 10,000 Bills Payable 2,000 Building 20,000 Anil’s Capital 50,000 Investment 14,000 Jatin’s Capital 40,000 Goodwill 22,000 Ramesh’s Capital 40,000 1,84,400 1,84,400

Ramesh died on 31st March 2002. The following adjustments were agreed upon-
(a)          Building be appreciated by Rs. 2,000
(b)          Investments be valued at 10% less than the book value.
(c)          All debtors (except 20% which are considered as doubtful) were good.
(d)          Stock be increased by 10 %
(e)          Goodwill be valued at 2 years’ purchase of the average profit of the past five years.
(f)           Ramesh’s share of profit to the death be calculated on the basis of the profit of the preceding year. profit for the years 1997, 1998, 1999 and 2000 were Rs. 26,000, Rs. 22,000,  Rs. 20,000  and Rs. 24,000 respectively.
Prepare revaluation account, partner’s capital Account, Ramesh ‘s Executors’ Account and Balance sheet immediately after Ramesh’s death assuming  that Rs. 18, 425 be paid immediately to his executors and balance to b left to the Ramesh’s Executor’s Account

Revaluation Account
 Particulars Rs Particulars Rs Investment A/c 1,400 Building A/c 2,000 Provision for doubtful debt A/c 2,400 Stock A/c 1,000 Loss transferred to Anil’s Capital A/c 400 Jatin’s Capital A/c 200 Ramesh’s Capital A/c 200 3800 3800
Partners Capital Accounts
 Particulars Anil Jatin Ramesh Particulars Anil Jatin Ramesh Goodwill A/c 11000 5500 5500 By Balance b/d 50000 40000 40000 Ramesh Capital A/c 7333 3667 Profit and Loss A/c 9000 4500 4500 Revaluation A/c (Loss) 400 200 200 Profit  &Loss Susp A/c 1125 Ramesh’s  Executor’s A/c 50925 Anil’s Capital A/c 7333 Balance c/d 40,267 35,133 ---- Jatin’s Capital A/c 3667 59,000 41,500 56,625 59,000 41,500 56,625

Ramesh’s Executor’s account
 Particulars Rs Particulars Rs Cash Account 18425 Ramesh’s Capital account 50925 Balance c/d 32500 50925 50925

Balance sheet
 Liabilities Rs Assets Rs Bank Loan 10, 000 Cash 81,575 Creditors 20,400 Debtors       20000 Less Provision 4000 16000 Bills Payable 2,000 Stock 11000 Ramesh’s Executor’s Loan 32,500 Building 22000 Anil’s Capital 40,267 Investments 12600 Jatin’s Capital 35,133 Profit &Loss Suspense A/c 1125 1,44,300 1,44,300