On the death of C, a partner in the firm of A, B and C (sharing profits in the ratio 5:3:2), the Balance Sheet

Exercises · Q9

Q. On the death of C, a partner in the firm of A, B and C (sharing profits in the ratio 5:3:2), the Balance Sheet showed a General Reserve of ₹40,000 and a debit balance of ₹8,000 in the Profit and Loss Account. Show how these two items are adjusted in the partners' capital accounts, including C's.

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Step 1 — General Reserve (₹40,000), shared in the old ratio 5:3:2 (10 parts).

Partner	Share	Amount (₹)
A	5/10	20,000
B	3/10	12,000
C	2/10	8,000

Journal entry: General Reserve A/c Dr ₹40,000; To A's Capital A/c ₹20,000; To B's Capital A/c ₹12,000; To C's Capital A/c ₹8,000.

Step 2 — Accumulated loss in the P&L A/c (₹8,000), shared in the same old ratio 5:3:2.

Partner	Share	Amount (₹)
A	5/10	4,000
B	3/10	2,400
C	2/10	1,600

Journal entry: A's Capital A/c Dr ₹4,000; B's Capital A/c Dr ₹2,400; C's Capital A/c Dr ₹1,600; To Profit and Loss A/c ₹8,000. …

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Same / Similar Concept — real previous-year questions on the same or a closely similar concept, not this exact question.

CBSE 2024Set ANNUAL8 marks

Q. Suresh, Naresh and Paresh were equal partners. On 31 st March, 2019 their Balance sheet was as follows: Balance Sheet as on 31 st March, 2019 Liabilities Amount (₹) Assets Amount (₹) Capital Accounts: Land and Building 2,00,000 Suresh 2,50,000 Furniture 1,50,000 Naresh 1,00,000 Debtors 1,50,000 Paresh 1,00,000 Cash 1,00,000 Sundry creditors 1,50,000 6,00,000 6,00,000 Suresh died on 30 th June, 2019 and the following adjustments were agreed as: Furniture was to be adjusted to its market price of ₹ 1,70,000. Land and building was to be depreciated by 10%. Provide R.D.D. at 5% on debtors. The profit up to the date of death of Suresh is to be calculated on the basis of average profit of last year which was ₹ 90,000. Prepare: Profit and loss adjustment account. Partners’ capital account. Balance sheet of the continuing firm.

›Reveal solution

Furniture rises by ₹20,000 (gain) while Land & Building depreciation ₹20,000 and new RDD ₹7,500 are losses, giving a net revaluation loss of ₹7,500 shared equally (₹2,500 each). Suresh is credited with ₹7,500 profit up to death (3 months of ₹90,000 average profit ÷ 3 partners). His closing balance ₹2,55,000 goes to his Executor's Loan A/c; the continuing firm's Balance Sheet totals ₹6,00,000.

Step 1 — Profit & Loss Adjustment (Revaluation) Account

Dr. Particulars	Amount (₹)	Cr. Particulars	Amount (₹)
To Land & Building A/c (10% dep.)	20,000	By Furniture A/c (rise to 1,70,000)	20,000
To R.D.D. A/c (5% on 1,50,000)	7,500	By Partners' Capital A/cs (loss):
		Suresh 2,500 · Naresh 2,500 · Paresh 2,500	7,500
Total	27,500	Total	27,500

Net revaluation loss = 27,500 − 20,000 = ₹7,500, shared equally = ₹2,500 each.

Step 2 — Profit up to date of death (Suresh)

Profit for 3 months (1 April → 30 June) = ₹90,000 × 3/12 = ₹22,500. Suresh's share = 22,500 × 1/3 = ₹7,500 (debited to Profit & Loss Suspense A/c, shown as an asset).

Step 3 — Partners' Capital Accounts

Dr. Particulars	Suresh	Naresh	Paresh	Cr. Particulars	Suresh	Naresh	Paresh
To P&L Adjustment (loss)	2,500	2,500	2,500	By Balance b/d	2,50,000	1,00,000	1,00,000
To Suresh's Executor's Loan A/c	2,55,000	—	—	By P&L Suspense (profit)	7,500	—	—
To Balance c/d	—	97,500	97,500
Total	2,57,500	1,00,000	1,00,000	Total	2,57,500	1,00,000	1,00,000

Step 4 — Balance Sheet of the continuing firm (as on 30 June 2019)

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Balance Sheet as on 31 st March, 2019
Liabilities	Amount (₹)	Assets	Amount (₹)
Capital Accounts:		Land and Building	2,00,000
Suresh	2,50,000	Furniture	1,50,000
Naresh	1,00,000	Debtors	1,50,000
Paresh	1,00,000	Cash	1,00,000
Sundry creditors	1,50,000
	6,00,000		6,00,000
Suresh died on 30
th
June, 2019 and the following adjustments were agreed as:
Furniture was to be adjusted to its market price of ₹ 1,70,000.
Land and building was to be depreciated by 10%.
Provide R.D.D. at 5% on debtors.
The profit up to the date of death of Suresh is to be calculated on the basis of average profit of last year which was ₹ 90,000.
Prepare:
Profit and loss adjustment account.
Partners’ capital account.
Balance sheet of the continuing firm.

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