Death of a Partner Problems and Solutions [AHSEC Solved Practical Problems 2012 to 2025]

Death of a Partner Problems and Solutions
[AHSEC Solved Practical Problems 2012 to 2025]

2025

Babatu, Cintu and Montu were partners in a firm sharing profits and losses in the ratio of their capitals. Their Balance Sheet on 31-03-2022 was as follows:

Balance Sheet

As on 31-03-2022

Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	3,000	Furniture	8,000
Reserve Fund	3,200	Stock	6,000
Capital :		Debtors	6,000
Babatu	10,000	Bill. Receivable	1,000
Cintu	5,000	Cash	5,200
Montu	5,000
Total	26,200	Total	26,200

Babatu died on 30-06-2022. Under the terms of the partnership deed, the executors of a deceased partner were entitled to:

(i) Amount standing to the credit of deceased partner's capital account.

(ii) Interest on capital @ 5% p.a.

(iii) Share of goodwill on the basis of twice the average of past three years' profits.

(iv) Share of profit from the closing of the last financial year to the date of death on the basis of last year's profits.

Profits for 2019-20, 2020-21 and 2021-22 were ₹6,000, ₹8,000 and ₹7,000 respectively.

Prepare Babatu's capital account on the date of his death.

Ans:

Babatu’s Capital A/c

Particulars

Amount

Particulars

Amount

To Babatu’s Executors A/c

19,600

By Balance b/d

By Reserve Fund (3,200*2/4)

By Interest on capital

(10,000*5%*3/12)

By Cintu’s capital A/c

By Montu’s capital A/c

By P/L Suspense A/c

(7,000*3/12*2/4)

10,000

1,600

125

3,500

875

19,600

W/N: Calculation of Babatu’s share of goodwill

(i) Average profit = (6,000+8,000+7,000)/3 =7,000

Goodwill = 7,000*2 = 14,000

Babatu’s Share of Goodwill = 14,000*2/4 = 7,000

Cintu’s contribution = 7,000*1/2 = 3,500

Montu’s Contribution = 7,000*1/2 = 3,500

2023

14. A, B and C were in partnership sharing profit and losses equally. On 31^st December, 2021 their Balance Sheet was as follows: 6

Balance Sheet

Liabilities

Rs.

Assets

Rs.

Capital:

A = 10,000

B = 5,000

C = 5,000

Reserve Fund

Creditors

20,000

3,300

2,000

Plant and Machinery

Stock

Sundry Debtors

Cash at Bank

Cash in Hand

10,000

4,000

6,000

5,000

300

25,300

The firm took a joint life policy for Rs. 9,000 payables on the first death.

C died on 31^st March, 2022. Under the partnership agreement the executors of a deceased partner were entitled to:

(1) Amount standing to the credit of deceased partner’s capital account.

(2) His share of goodwill on the basis of twice the average of the past three years’ profits.

(3) Share of profit from the closing of the last financial year to the date of death on the basis of last year’s profits.

(4) Interest on capital @ 5% p.a.

(5) Profits for the last three years were:

2019 = Rs. 6,000.

2020 = Rs. 8,000.

2021 = Rs. 7,000.

Prepare C’s capital account on the date of his death.

Ans:

C’s Capital A/c

Particulars

Amount

Particulars

Amount

To C’s Executors A/c

14,412.5

By Balance b/d

By Reserve Fund (3,300*1/3)

By Interest on capital

(5,000*5%*3/12)

By A’s capital A/c

By B’s capital A/c

By P/L Suspense A/c

(7,000*3/12*1/3)

By Joint Life Policy

5,000

1,100

62.5

2,333

2,334

583

3,000

14,412.5

W/N: Calculation of Babatu’s share of goodwill

(i) Average profit = (6,000+8,000+7,000)/3 =7,000

Goodwill = 7,000*2 = 14,000

C’s Share of Goodwill = 14,000*1/3 = 4,667

A’s contribution = 4,667*1/2 = 2,333

B’s Contribution = 4,667*1/2 = 2,334

2022

17. P, Q and R were in partnership sharing profits and losses in the ratio of 4: 3: 3. On 31^st March, 2020 their Balance Sheet was as follows: 5

Balance Sheet

Liabilities

(Rs.)

Assets

(Rs.)

Creditors

Reserve

Capitals:

P 1,05,000

Q 85,000

R 80,000

87,000

33,000

2,70,000

Fixed Assets

Stock and Debtors

Cash

2,90,000

85,000

15,000

3,90,000

‘Q’ died on 30.06.2020. Under the partnership agreement the executors of a deceased partner were entitled to:

a) Amount standing to the credit of deceased partner’s capital account.

b) Interest on capital @ 12% p.a.

c) His share of goodwill. The goodwill of the firm on Q’s death was valued at Rs. 2,70,000.

d) Share of profit from the closing of the last financial year to the date of death on the basis of last year’s profits.

e) The profit of the firm for the year ended 31.3.2020 was Rs. 2,40,000.

Prepare Q’s capital account on the date of his death.

Q’s Capital Account

Particulars

Amount

Particulars

Amount

To Q’s Executors A/c

1,96,450

By Balance b/d

By Reserve (33,000*3/10)

By Interest on capital

(85,000*12%*3/12)

By P’s capital A/c

By R’s capital A/c

By P/L Suspense A/c

(2,40,000*3/12*3/10)

85,000

9,900

2,550

46,286

34,714

18,000

1,96,450

W/N: Calculation of Babatu’s share of goodwill

(i) Goodwill = 2,70,000

Q’s Share of Goodwill = 2,70,000*3/10 = 81,000

P’s contribution = 81,000*4/7 = 46,286

R’s Contribution = 81,000*3/7 = 34,714

2020

Q. Ajoy, Bijoy and Sanjay were partners in a firm sharing profits in the ratio of 3 : 2 : 1. On 31^st March, 2019 their Balance Sheet was as under: 5

Balance Sheet

Liabilities

Rs.

Assets

Rs.

Creditors

Reserve

Capital:

Ajoy 24,000

Bijoy 12,000

Sanjay 8,000

4,000

6,000

44,000

Building

Machinery

Stock

Debtors

Cash at Bank

20,000

16,000

5,100

6,000

6,900

54,000

Ajoy died on 30/09/2019. Under the partnership agreement the executors of a deceased partner were entitled to:

a) Amount standing to the credit of Partners’ Capital account.

b) Interest on Capital @ 12% p.a.

c) Share of goodwill on the basis of 4 years purchase of last 3 years average profits.

d) Share of profit from the closing of the last financial year to the date of death on the basis of last year’s profit.

e) Profit for the last three years were:

Year

Profit

2016-17

2017-18

2018-19

8,000 /-

12,000 /-

7,000 /-

Prepare Ajoy’s Capital A/c on the date of his death.

Solution:

Ajoy’s Capital A/c

Particulars

Amount

Particulars

Amount

To Ajoy’s Executors A/c

45,190

By Balance b/d

By Interest on capital (24,000 x 12%x6/12)

By Bijoy’s capital

By Sanjoy’s Capital

By P/L Suspense A/c (7,000 x 6/12 x 3/6)

24,000

1,440

12,000

6,000

1,750

45,190

WORKING NOTES

(i) Average profit = (8,000+12,000+7,000)/3 = 9,000

Value of goodwill = 9,000 x 4 = 36,000

Now, Ajoy’s share = 36,000 x 3/6 = 18,000

Bijoy’s contribution = 18,000 x 2/3 = 12,000

Sanjoy contribution = 18,000 x 1/3 = 6,000

2019

Q. Following is the Balance Sheet of P, Q, and R as on March 31, 2018. 5

Balance Sheet

Liabilities

(Rs.)

Assets

(Rs.)

Sundry Creditors

General Reserve

Capital:

P 30,000/-

Q 20,000/-

R 20,000/-

16,000

70,000

Bills Receivable

Furniture

Stock

Sundry Debtors

Cash at Bank

Cash in Hand

16,000

22,600

20,400

22,000

18,000

3,000

1,02,000

Q died on June 30, 2018. Under the agreement the executors of the deceased partner were entitled to:

a) Amount standing to the credit of Partner’s Capital A/c.

b) Interest on Capital @ 5% p.a.

c) Share of goodwill on the basis of twice the average of the past three years’ profit.

d) Share of profit from the closing of the last financial year to the date of death on the basis of last year’s profit (2017-18). Profit for the last three years were:

Year

Profit (Rs.)

2015 – 16

2016 – 17

2017 – 18

12,000/-

16,000/-

14,000/-

Prepare Q’s capital account on the date of his death.

Ans:

Q’s Capital A/c

Particulars

Amount

Particulars

Amount

To Q’s Executors A/c

36,084

By Balance b/d

By General reserve (16,000*1/3)

By Interest on capital (20,000*5%*3/12)

By P’s capital A/c

By R’s capital A/c

By P/L Suspense A/c

(14,000*3/12*1/3)

20,000

5,333

250

4,667

1,167

36,084

W/N:

(i) Average profit = (12,000+16,000+14,000)/3 = 14,000

Goodwill = 14,000*2 = 28,000

Q’s Share of Goodwill = 28,000*1/3 = 9,333

P’s contribution = 9,333*1/2 = 4,667

R’s Contribution = 9,333*1/2 = 4,667

2018

16. Mohit, Sohan and Rahul were partners sharing profits in the ratio of 2 : 2 : 1. Their Balance Sheet as on 31^st March, 2017 was as follows:

Balance Sheet

Liabilities

(Rs.)

Assets

(Rs.)

Capital:

Mohit: 30,000/-

Sohan: 20,000/-

Rahul: 20,000/-

General Reserve

Creditors

70,000

5,000

25,000

Fixed Assets

Stock

Sundry Debtors

Cash at Bank

60,000

10,000

20,000

10,000

1,00,000

Sohan died on June 30, 2017. It was agreed between the remaining partners and his executors that:

1) Goodwill will be valued at Rs. 50,000.

2) Interest on capital is provided at 10% p.a.

3) Profit for the year 2017-18 be taken as having accrued at the same rate as that of the previous year which was Rs. 40,000/-

4) The amount due to Sohan shall be transferred to his Executor’s Loan Account.

Prepare Sohan Capital Account as on the date of his death. 5

Ans:

Sohan’s Capital A/c

Particulars

Amount

Particulars

Amount

To Sohan’s Executors A/c

46,500

By Balance b/d

By Interest on Capital A/c

By General reserve

By P/L Suspense

By Mohit’s Capital A/c

By Rahul’s Capital A/c

20,000

500

2,000

4,000

13,333

6,667

46,500

2017

16. A, B and C were partners in a firm sharing profits in the ratio of 3:2:1. Their Balance Sheet as on 31/03/16 was as follows:

Liabilities

(Rs.)

Assets

(Rs.)

Sundry Creditors

Capital Account:

A: = 20,000/-

B: = 10,000/-

C: = 20,000/-

4,000

50,000

Buildings

Machinery

Stock

Debtors

Cash at Bank

20,000

16,000

4,000

15,000

5,000

60,000

A died on 30/09/2016. Under the agreement, the executors of the deceased partner were entitled to:

a) Amount outstanding to the credit of partner’s capital account.

b) Interest on capital at 12% per annum.

c) Share of goodwill on the basis of four year’s purchase of the average profit of last three years.

d) Share of profit from closing of the last financial year to the date of death on the basis of last year’s profit.

e) Profits for the last three years were:

Year

Profits

2013-14

2014-15

2015-16

8,000/-

12,000/-

7,000/-

Prepare A’s capital Account on the date of his death. 5

Solution:

A’s Capital A/c

Particulars

Amount

Particulars

Amount

To A’s executor’s A/c

43,950

By Balance b/d

By Interest on Capital

By B’s Capital A/c

By C’s Capital A/c

By Profit & Loss Suspense A/c

By Reserves A/c

20,000

1,200

12,000

6,000

1,750

3,000

43,950

Working Note:

1. Interest on Capital = 20,000 x 6/12 x 12/100 = 1,200

2. Average Profit = 8,000 + 12,000 + 7,000/3 = 27,000/3 = 9,000

\Goodwill = 9,000 x 4 = 36,000

\Gaining Ratio = 2/3 – 2/6 : 1/3 – 1/6

= 4 – 2/6 : 2 – 1/6

= 2/6 : 1/6

\Goodwill of B = 36,000 x 2/6 = 12,000

\Goodwill of C = 36,000 x 1/6 = 6,000

3. Profit of A = 7,000 x 3/6 x 6/12 = 1,750

4. Reserve of A = 6,000 x 3/6 = 3,000

2016

16. Anupam, Binoy and Chandan were partners in a firm sharing profits in the ratio of 2: 3: 5. On 31^st March, 2014, their Balance Sheet was as follows:

Balance Sheet

Liabilities

(Rs.)

Assets

(Rs.)

Capitals :

Anupam = 60,000/-

Binoy = 50,000/-

Chandan = 30,000/-

Reserve

Creditors

Bills Payable

1,40,000

12,000

20,000

2,000

Cash at Bank

Debtors

Bills Receivable

Stock

Furniture

Machinery

16,000

30,000

8,000

20,000

60,000

40,000

TOTAL

1,74,000

TOTAL

1,74,000

Anupam died on 1^st October, 2014. It was agreed between his executors and the remaining partners that:

a) Goodwill will be valued at 3 years purchase of the average profits of the last four years which were :

Year

Profit

2010-11

2011-12

2012-13

2013-14

30,000/-

40,000/-

b) Machinery and Furniture be valued at Rs. 36,000/- and Rs. 56,000/- respectively.

c) Profit for the year 2014-15 be taken as having accrued at the same rate as that of the previous year.

d) Interest on capital be provided at 10% p.a.

e) The amount due to Anupam shall be transferred to his Executor’s Loan Account.

Prepare Anupam’s Capital Account as on the date of his death. 5

Solution:

Anupam’s Capital A/c

Particulars

Amount

Particulars

Amount

To Revaluation A/c

To Anupam’s executors A/c

1,600

90,300

By Balance b/d

By Interest on Capital A/c

By Profit & Loss suspense A/c

By Binoy’s Capital A/c

By Chandan’s Capital A/c

By Reserve A/c

60,000

3,000

4,000

8,437.5

14,062.5

2,400

91,900

Working Note:

Interest on Capital = 60,000 x 10/100 x 6/12 = 3,000

Profit of Anupam’s = 40,000 x 2/10 x 6/12 = 4,000

Goodwill = 30,000 + 40,000 + 40,000 + 40,000/4 x 3

= 1,50,000/4 x 3

= 1,12,500

Gaining Ratio = 3/8 – 3/10 : 5/8 – 5/10

= 15 – 12/40 : 25 – 20/40

= 3/40 : 5/40

\Binoy’s Share = 3/40 x 1,12,500 = 8,437.5

Chandan’s Share = 5/40 x 1,12,500 = 14,062.5

And Reserve of Anupam’s = 12,000 x 2/10 = 2,400

2015

17. A, B and C were partners in a firm sharing profits in the ratio 5:3:2. On 31^st March, 2013, their Balance Sheet was as follows:

Balance Sheet

Liabilities

Rs.

Assets

Rs.

Creditors

Reserves

Capital :

A = 30,000/-

B = 25,000/-

C = 15,000/-

11,000/-

6,000/-

70,000/-

Buildings

Machinery

Stock

Debtors

Cash at Bank

20,000/-

30,000/-

10,000/-

19,000/-

8,000/-

87,000/-

A died on 1^st October, 2013. It was agreed between his executors and the remaining partners that:

(i) Goodwill to be valued at 2.5 years purchase of the average profits of the previous four years which were:

Year

Profit (Rs.)

2009 – 2010

2010 – 2011

2011 – 2012

2012 – 2013

13,000/-

12,000/-

20,000/-

15,000/-

(ii) Machinery and Building be valued at Rs. 28,000/- and Rs. 25,000/- respectively.

(iii) Profit for the year 2013 – 14 is taken as having accrued at the same ratio as that of the previous year.

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

(v) The mount due to A shall be transferred to his Executor’s Account.

Prepare A’s Capital Account as on the date of his death. 5

Solution:

A’s Capital A/c

Particulars

Amount

Particulars

Amount

To A’s executor’s A/c

58,500

By Balance b/d

By Revaluation A/c

By Interest on Capital

By P/L Suspense A/c

By B’s Capital A/c

By C’s Capital A/c

By Reserve A/c

30,000

1,500

3,750

11,250

7,500

3,000

58,500

Working Note:

(1) Interest on Capital = 30,000 x 10/100 x 6/12

= 1,500

(2) Profit of A = 15,000 x 5/10 x 6/12 = 3,750

(3) Goodwill = 13,000 + 12,000 + 20,000 + 15,000/4 x 2.5

= 60,000/4 x 25/10

=37,500

\A’s share of goodwill = 37,500 x 5/10 = 18,750

B’s share of goodwill = 37,500 x 3/10 = 11,250

C’s share of goodwill = 37,500 x 2/10 = 7,500

2013

19. X, Y and Z are in a partnership sharing profits in the proportion of 5:3:2. On 31.03.2011 their Balance sheet was as under: 8

Liabilities

Amount

Assets

Amount

Creditors

Reserve

Capital Account:

X – 35000

Y – 20000

Z – 15000

7000

10000

70000

Building

Machinery

Stock and Debtors

Patents

Cash

20000

30000

18000

6000

13000

87000

X died on 01.10.2011. It was agreed between his executors and the remaining partners that:

(i) Goodwill is valued at 2 years purchase of the average profit of the previous 5 years which were:

2006 – 07:15000, 2007 – 08: 13000, 2008 – 09: 12000, 2009 – 10: 15000, 2010 – 11: 20000.

(ii) Patents are valued at Rs.8000, Machinery at Rs.28000, and Building at Rs.30000.

(iii) Profit for the year 2011 – 12 is taken as having accrued at the same rate as the previous year.

(iv) Interest on Capital is provided at 10% p.a.

(v) A sum of Rs.11500 was to be paid to his executors immediately.

Prepare X’s Capital Account and his Executor’s Account at the time of his death.

Solution:

X’s Capital A/c

Particulars

Amount

Particulars

Amount

To X’s Executors A/c

66,750

By balance b/d

By Reserve A/c

By Revaluation A/c

By P/L suspense A/c

By Interest on capital A/c

By Y’s Capital A/c

By Z’s Capital A/c

35,000

5,000

1,750

9,000

6,000

66,750

X’s Executors A/c

Particulars

Amount

Particulars

Amount

To Bank A/c

To balance c/d

11,500

55,250

By X’s capital A/c

66,750

Revaluation A/c

Particulars

Amount

Particulars

Amount

To Machinery

To Profit on Revaluation

X: 10,000 x 5/10 = 5,000

2,000

10,000

By Patents

By Building

2,000

10,000

12,000

Working Note:

1. Profit of X = 20,000 x 5/10 x 6/12 = 5,000

2. Interest on Capital = 35,000 x 10/100 x 6/12 = 1,750

3. Goodwill = (15,000 + 13,000 + 12,000 + 15,000 + 20,000)/5 x 2

= (75,000/5) x 2

= 30,000

\X’s share of goodwill = 30,000 x 5/10 = 15,000

Y’s Contribution = 30,000 x 3/10 = 9,000

Z’s Contribution = 30,000 x 2/10 = 6,000

Death of a Partner Problems and Solutions [AHSEC Solved Practical Problems 2012 to 2025]