# Q. A, B and C are in partnership ​ sharing profit in the proportions of two-thirds, one-sixth and one -sixth respectively. A died on the 30th June 2011 , three months after the annual accounts had been prepared and in accordance with the partnership agreement, his share of the profit to the date of death was estimated on the basis of the profit for the preceding year. In addition to this the agreement provided for interest on capital at 5%. per annum on the balance  standing to the credit of the capital account at the date of the last Balance Sheet and also for goodwill, which was to be brought into account at 2 year's purchase of the average profit of the last three years. A's capital on 31st March,2011 stood at rs. 1,20,000, and his drawings from them to the date of death amounted to rs. 9,000. The net profits of the business for the three preceding years amounted to Rs. 33,500; Rs. 41,500 and Rs. 40,500, respectively.

Dear Student

 A's Capital A/c Date Particulars Amount (in Rs) Date Particulars Amount (in Rs) Drawings 9,000 Bal B/d 120,000 B's Capital A/c 25,667 C's Capital A/c 25,666 Profit and Loss suspense A/c 6,750 A's Executors A/c 170,583 Interest on Capital (120,000 x 5% x 3/12) 1,500 179,583 179,583

 Calculation of Goodwill Average Profit of Last 3 Years 38,500 Goodwill as sum of 2 Years profit 77,000 Share of A (77,000 x 4/6) 51,333 Gaining Ratio 1:1 Goodwill Adjustment for B B's Capital A/c (51,333 x 1/2) 25,667 C's Capital A/c (51,333 x 1/2) 25,667

 Profit till Death Profit of Preceeding year 40,500 Profit of 3 months on the basis of above profit (33,500 x 3/12) 10,125 A's Share (8,375 x 4/6) 6,750

Regards

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