Anil, Sunil and Mohit were partners sharing profits and losses in the proportion of their capital Their Balance Sheet as on 31st March, 2019 was as follows:
| Balance Sheet as on 31st March, 2019 | | | | |
| --- | --- | --- | --- | --- |
| Liabilities | Amount (₹) | Assets |

Question

Anil, Sunil and Mohit were partners sharing profits and losses in the proportion of their capital Their Balance Sheet as on 31st March, 2019 was as follows:
| Balance Sheet as on 31st March, 2019 |  |  |  |  |
| --- | --- | --- | --- | --- |
| Liabilities | Amount (₹) | Assets | Amount (₹) |  |
| Capital Accounts: |  | Land and Building |  | 80,000 |
| Anil | 60,000 | Motor Lorry |  | 40,000 |
| Sunil | 40,000 | Debtors | 32,000 | 28,000 |
| Mohit | 20,000 | **Less** : R.D.D. | (4,000) |  |
| Creditors | 50,000 | Furniture |  | 36,000 |
| Outstanding Salary | 6,000 | Bank |  | 28,000 |
| Reserve fund | 36,000 |  |  |  |
|  | 2,12,000 |  |  | 2,12,000 |
Mohit died on 1st August. 2019 and the following adjustments were made:
(1) Assets to be revalued as under:
| Land and Building | ₹ 88,000 |
| --- | --- |
| Motor Lorry | ₹ 36,000 |
| Furniture | ₹ 34,000 |
(2) All debtors were good.
(3) Goodwill of the firm valued at two times the average profit of lost 4 years' profit.
(4) Mohit's share of profit is to be calculated on the basis of average profit of the last three years.
(5) Profit for four years 1st year ₹ 12,000, 2nd year ₹ 24,000, 3rd year ₹ 14,000, 4th year ₹ 22,000.
Prepare:
Mohit's capital account showing amount payable to his executor.
Give working note of Mohit's share of goodwill and profit up to the date of his death.

Accepted Answer

>

> [!TLDR]
> Profit-sharing ratio is the capital ratio 3:2:1, so Mohit's share = 1/6. Revaluation gives a net profit of ₹ 6,000 (Mohit ₹ 1,000). Goodwill = 2 × average profit of 4 years = ₹ 36,000 (Mohit ₹ 6,000). Profit up to death is based on the average of the last 3 years for 4 months (Mohit ₹ 1,111). Adding his capital ₹ 20,000 and reserve fund share ₹ 6,000, the amount transferred to his executor is ₹ 34,111.
>
> **Working Note 1 — Profit-sharing ratio:** Capitals 60,000 : 40,000 : 20,000 = **3 : 2 : 1**, so Mohit's share = 1/6.
>
> **Working Note 2 — Revaluation of assets** (profit shared, not a full account asked):
>
> | Item | Increase (+) / Decrease (−) ₹ |
> | --- | --- |
> | Land & Building (80,000 → 88,000) | + 8,000 |
> | Motor Lorry (40,000 → 36,000) | − 4,000 |
> | Furniture (36,000 → 34,000) | − 2,000 |
> | R.D.D. written back (all debtors good) | + 4,000 |
> | **Net Revaluation Profit** | **+ 6,000** |
>
> Mohit's share = 6,000 × 1/6 = **₹ 1,000**.
>
> **Working Note 3 — Goodwill:** Average profit of last 4 years = (12,000 + 24,000 + 14,000 + 22,000) ÷ 4 = 72,000 ÷ 4 = ₹ 18,000. Goodwill = 2 × 18,000 = ₹ 36,000. Mohit's share = 36,000 × 1/6 = **₹ 6,000**.
>
> **Working Note 4 — Profit up to date of death:** based on average profit of last 3 years = (24,000 + 14,000 + 22,000) ÷ 3 = 60,000 ÷ 3 = ₹ 20,000. Period 1 April 2019 to 1 August 2019 = 4 months. Firm's profit for the period = 20,000 × 4/12 = ₹ 6,666.67. Mohit's share = 6,666.67 × 1/6 = **₹ 1,111** (rounded).
>
> **Working Note 5 — Reserve Fund:** ₹ 36,000 × 1/6 = **₹ 6,000** credited to Mohit.
>
> **Mohit's Capital Account**
> …

Balance Sheet as on 31st March, 2019
Liabilities	Amount (₹)	Assets	Amount (₹)
Capital Accounts:		Land and Building		80,000
Anil	60,000	Motor Lorry		40,000
Sunil	40,000	Debtors	32,000	28,000
Mohit	20,000	Less : R.D.D.	(4,000)
Creditors	50,000	Furniture		36,000
Outstanding Salary	6,000	Bank		28,000
Reserve fund	36,000
	2,12,000			2,12,000
Mohit died on 1st August. 2019 and the following adjustments were made:
(1) Assets to be revalued as under:
Land and Building	₹ 88,000
---	---
Motor Lorry	₹ 36,000
Furniture	₹ 34,000
(2) All debtors were good.
(3) Goodwill of the firm valued at two times the average profit of lost 4 years' profit.
(4) Mohit's share of profit is to be calculated on the basis of average profit of the last three years.
(5) Profit for four years 1st year ₹ 12,000, 2nd year ₹ 24,000, 3rd year ₹ 14,000, 4th year ₹ 22,000.
Prepare:
Mohit's capital account showing amount payable to his executor.
Give working note of Mohit's share of goodwill and profit up to the date of his death.

Item	Increase (+) / Decrease (−) ₹
Land & Building (80,000 → 88,000)	+ 8,000
Motor Lorry (40,000 → 36,000)	− 4,000
Furniture (36,000 → 34,000)	− 2,000
R.D.D. written back (all debtors good)	+ 4,000
Net Revaluation Profit	+ 6,000

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