T.S. Grewal’s Double Entry Book Keeping—Accounting for Not-for-Profit Organisations and Partnership Firms
1. A, B and C were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On 31st March, 2019, their
Balance Sheet was as follows:
Liabilities
` Assets `
Creditors 11,000 Building 20,000
Reserves 6,000 Machinery 30,000
A’s Loan A/c 5,000 Stock 10,000
Capital A/cs: Patents 11,000
A 25,000 Debtors 8,000
B 25,000 Cash 8,000
C 15,000 65,000
87,000 87,000
A died on 1st October, 2019. It was agreed among his executors and the remaining partners that:
(i) Goodwill to be valued at 2½ years’ purchase of the average profit of the previous 4 years, which
were 2015–16: ` 13,000; 2016–17: ` 12,000; 2017–18: ` 20,000 and 2018–19: ` 15,000.
(ii) Patents be valued at ` 8,000; Machinery at ` 28,000; and Building at ` 25,000.
(iii) Profit for the year 2019–20 be taken as having accrued at the same rate as that of the previous year.
(iv) Interest on capital be provided @ 10% p.a.
(v) Half of the amount due to A to be paid immediately to the executors and the balance transferred
to his (Executors’) Loan Account.
Prepare A’s Capital Account and A’s Executors’ Account as on 1st October, 2019.
(Delhi, AI, Foreign 2004, Modified)
[Ans.: Transfer to A’s Executors’ A/c—` 56,900; A’s Executors’ Loan A/c—` 28,450.]
2. B, C and D were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On 31st December, 2008,
their Balance Sheet was as follows:
Liabilities
` Assets `
Creditors 43,000 Cash 10,200
Bills payable 17,000 Stock 24,500
General Reserve 70,000 Debtors 27,300
Capital A/cs: Land and Building 1,40,000
B 40,000 Profit & Loss A/c 70,000
C 50,000
D 52,000 1,42,000
2,72,000 2,72,000
B died on 31st March, 2009. The Partnership Deed provided for the following on the death of a partner:
(a) Goodwill of the firm was to be valued at 3 years’ purchase of the average profit of last 5 years.
The profits for the years ended 31st December, 2007, 31st December, 2006, 31st December, 2005,
and 31st December, 2004 were ` 70,000; ` 60,000; ` 50,000 and ` 40,000 respectively.
(b) B’s share of profit or loss till the date of his death was to be calculated on the basis of the profit
or loss for the year ended 31st December, 2008.
You are required to calculate the following:
(i) Goodwill of the firm and B’s share of goodwill at the time of his death.
(ii) B’s share in the profit or loss of the firm till the date of his death.
(iii) Prepare B’s Capital Account at the time of his death to be presented to his Executors. (AI 2010 C)
[Ans.: B’s Share of Goodwill: ` 45,000; Share in the loss of the firm: ` 8,750;
Amount due to B’s Executors: ` 76,250.]
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, T.S. Grewal’s Double Entry Book Keeping—Accounting for Not-for-Profit Organisations and Partnership Firms
3. Babita, Chetan and David are partners in a firm sharing profits in the ratio of 2 : 1 : 1 respectively. Firm
closes its accounts on 31st March every year. Chetan died on 30th September, 2012. There was a balance of
` 1,25,000 in Chetan’s Capital Account in the beginning of the year. In the event of death of any
partner, the Partnership Deed provides for the following:
(a) Interest on capital will be calculated at the rate of 6% p.a.
(b) The executor of deceased partner shall be paid ` 24,000 for his share of goodwill.
(c) His share of Reserve Fund of ` 12,000, shall be paid to his executor.
(d) His share of profit till the date of death will be calculated on the basis of sales. It is also specified
that the sales during the year 2011–12 were ` 4,00,000. The sales from 1st April, 2012 to 30th
September, 2012 were ` 1,20,000. The profit of the firm for the year ending 31st March, 2012
was ` 2,00,000.
Prepare Chetan’s Capital Account to be presented to his executor. (Delhi 2013 C)
[Ans.: Transferred to Chetan’s Executor’s Account—` 1,79,750;
Share of Chetan in current year’s profit—` 15,000.]
4. Akhil, Nikhil and Sunil were partners sharing profits and losses equally. Following was their Balance
Sheet as at 31st March, 2018:
Liabilities
` Assets `
Trade Creditors 40,000 Building 2,00,000
General Reserve 45,000 Plant and Machinery 80,000
Capital A/cs: Stock 35,000
Akhil 1,95,000 Debtors 80,000
Nikhil 1,20,000 Cash at Bank 85,000
Sunil 80,000 3,95,000
4,80,000 4,80,000
Sunil died on 1st August, 2018. The Partnership Deed provided that the executor of a deceased partner
was entitled to:
(a) Balance of Partners’ Capital Account and his share of accumulated reserve.
(b) Share of profits from the closure of the last accounting year till the date of death on the basis
of the profit of the preceding completed year before death.
(c) Share of goodwill calculated on the basis of three times the average profit of the last four years.
(d) Interest on deceased partner’s capital @ 6% p.a.
(e) ` 50,000 to be paid to deceased’s executor immediately and the balance to remain in his Loan
Account.
Profits and Losses for the preceeding years were: 2014–15—` 80,000 Profit; 2015–16—` 1,00,000 Loss;
2016–17—` 1,20,000 Profit; 2017–18—` 1,80,000 Profit.
Pass necessary Journal entries and prepare Sunil’s Capital Account and Sunil’s Executor’s Account.
[Ans.: Sunil’s Share of General Reserve—` 15,000; Interest on Capital—` 1,600;
Share of Goodwill—` 70,000; Share of profit—` 20,000;
Balance of Sunil’s Capital A/c transferred to Sunil’s Executor’s A/c—` 1,86,600;
Amount due to Sunil’s Executor—` 1,36,600.]
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1. A, B and C were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On 31st March, 2019, their
Balance Sheet was as follows:
Liabilities
` Assets `
Creditors 11,000 Building 20,000
Reserves 6,000 Machinery 30,000
A’s Loan A/c 5,000 Stock 10,000
Capital A/cs: Patents 11,000
A 25,000 Debtors 8,000
B 25,000 Cash 8,000
C 15,000 65,000
87,000 87,000
A died on 1st October, 2019. It was agreed among his executors and the remaining partners that:
(i) Goodwill to be valued at 2½ years’ purchase of the average profit of the previous 4 years, which
were 2015–16: ` 13,000; 2016–17: ` 12,000; 2017–18: ` 20,000 and 2018–19: ` 15,000.
(ii) Patents be valued at ` 8,000; Machinery at ` 28,000; and Building at ` 25,000.
(iii) Profit for the year 2019–20 be taken as having accrued at the same rate as that of the previous year.
(iv) Interest on capital be provided @ 10% p.a.
(v) Half of the amount due to A to be paid immediately to the executors and the balance transferred
to his (Executors’) Loan Account.
Prepare A’s Capital Account and A’s Executors’ Account as on 1st October, 2019.
(Delhi, AI, Foreign 2004, Modified)
[Ans.: Transfer to A’s Executors’ A/c—` 56,900; A’s Executors’ Loan A/c—` 28,450.]
2. B, C and D were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On 31st December, 2008,
their Balance Sheet was as follows:
Liabilities
` Assets `
Creditors 43,000 Cash 10,200
Bills payable 17,000 Stock 24,500
General Reserve 70,000 Debtors 27,300
Capital A/cs: Land and Building 1,40,000
B 40,000 Profit & Loss A/c 70,000
C 50,000
D 52,000 1,42,000
2,72,000 2,72,000
B died on 31st March, 2009. The Partnership Deed provided for the following on the death of a partner:
(a) Goodwill of the firm was to be valued at 3 years’ purchase of the average profit of last 5 years.
The profits for the years ended 31st December, 2007, 31st December, 2006, 31st December, 2005,
and 31st December, 2004 were ` 70,000; ` 60,000; ` 50,000 and ` 40,000 respectively.
(b) B’s share of profit or loss till the date of his death was to be calculated on the basis of the profit
or loss for the year ended 31st December, 2008.
You are required to calculate the following:
(i) Goodwill of the firm and B’s share of goodwill at the time of his death.
(ii) B’s share in the profit or loss of the firm till the date of his death.
(iii) Prepare B’s Capital Account at the time of his death to be presented to his Executors. (AI 2010 C)
[Ans.: B’s Share of Goodwill: ` 45,000; Share in the loss of the firm: ` 8,750;
Amount due to B’s Executors: ` 76,250.]
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, T.S. Grewal’s Double Entry Book Keeping—Accounting for Not-for-Profit Organisations and Partnership Firms
3. Babita, Chetan and David are partners in a firm sharing profits in the ratio of 2 : 1 : 1 respectively. Firm
closes its accounts on 31st March every year. Chetan died on 30th September, 2012. There was a balance of
` 1,25,000 in Chetan’s Capital Account in the beginning of the year. In the event of death of any
partner, the Partnership Deed provides for the following:
(a) Interest on capital will be calculated at the rate of 6% p.a.
(b) The executor of deceased partner shall be paid ` 24,000 for his share of goodwill.
(c) His share of Reserve Fund of ` 12,000, shall be paid to his executor.
(d) His share of profit till the date of death will be calculated on the basis of sales. It is also specified
that the sales during the year 2011–12 were ` 4,00,000. The sales from 1st April, 2012 to 30th
September, 2012 were ` 1,20,000. The profit of the firm for the year ending 31st March, 2012
was ` 2,00,000.
Prepare Chetan’s Capital Account to be presented to his executor. (Delhi 2013 C)
[Ans.: Transferred to Chetan’s Executor’s Account—` 1,79,750;
Share of Chetan in current year’s profit—` 15,000.]
4. Akhil, Nikhil and Sunil were partners sharing profits and losses equally. Following was their Balance
Sheet as at 31st March, 2018:
Liabilities
` Assets `
Trade Creditors 40,000 Building 2,00,000
General Reserve 45,000 Plant and Machinery 80,000
Capital A/cs: Stock 35,000
Akhil 1,95,000 Debtors 80,000
Nikhil 1,20,000 Cash at Bank 85,000
Sunil 80,000 3,95,000
4,80,000 4,80,000
Sunil died on 1st August, 2018. The Partnership Deed provided that the executor of a deceased partner
was entitled to:
(a) Balance of Partners’ Capital Account and his share of accumulated reserve.
(b) Share of profits from the closure of the last accounting year till the date of death on the basis
of the profit of the preceding completed year before death.
(c) Share of goodwill calculated on the basis of three times the average profit of the last four years.
(d) Interest on deceased partner’s capital @ 6% p.a.
(e) ` 50,000 to be paid to deceased’s executor immediately and the balance to remain in his Loan
Account.
Profits and Losses for the preceeding years were: 2014–15—` 80,000 Profit; 2015–16—` 1,00,000 Loss;
2016–17—` 1,20,000 Profit; 2017–18—` 1,80,000 Profit.
Pass necessary Journal entries and prepare Sunil’s Capital Account and Sunil’s Executor’s Account.
[Ans.: Sunil’s Share of General Reserve—` 15,000; Interest on Capital—` 1,600;
Share of Goodwill—` 70,000; Share of profit—` 20,000;
Balance of Sunil’s Capital A/c transferred to Sunil’s Executor’s A/c—` 1,86,600;
Amount due to Sunil’s Executor—` 1,36,600.]
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