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Illustrations · Illustration 18
Q.

Anil, Bhanu and Chandu were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On March 31, 2017, their Balance Sheet was as under:

LiabilitiesAmount (₹)AssetsAmount (₹)
Creditors11,000Buildings20,000
Reserve Fund6,000Machinery30,000
Anil's Capital30,000Stock10,000
Bhanu's Capital25,000Patents11,000
Chandu's Capital15,000Debtors8,000
Cash8,000
Total87,000Total87,000

Anil died on October 1, 2017. It was agreed between his executors and the remaining partners that:

  1. Goodwill to be valued at 2½ years' purchase of the average profits of the previous four years, which were: 2013-14 ₹13,000, 2014-15 ₹12,000, 2015-16 ₹20,000, 2016-17 ₹15,000.
  2. Patents be valued at ₹8,000; Machinery at ₹28,000; and Building at ₹25,000.
  3. Profit for the year 2017-18 to be taken as having accrued at the same rate as that of the previous year.
  4. Interest on capital be provided at 10% p.a.
  5. Half of the amount due to Anil be paid immediately. Prepare Anil's Capital Account and Anil's Executor's Account as on October 1, 2017.
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✓ Free question

Anil's ₹30,000 capital is increased by his reserve share (₹3,000), goodwill (₹18,750), intervening profit (₹3,750) and interest on capital (₹1,500) — revaluation nets to nil — giving ₹57,000. Half (₹28,500) is paid immediately and ₹28,500 remains payable to his executors. Bhanu and Chandu bear the goodwill in their old ratio 3 : 2 (₹11,250 and ₹7,500), since no new ratio is given.

Working Notes

1. Revaluation (transferred to all partners in old ratio, but nets to nil here): Patents ₹11,000 → ₹8,000 (−3,000); Machinery ₹30,000 → ₹28,000 (−2,000); Building ₹20,000 → ₹25,000 (+5,000). Net = ₹5,000 − ₹5,000 = nil.

2. Goodwill: average profit = (13,000 + 12,000 + 20,000 + 15,000) / 4 = ₹15,000; goodwill = 2½ × ₹15,000 = ₹37,500; Anil's share = 5/10 × ₹37,500 = ₹18,750. No new ratio is specified, so Bhanu and Chandu gain in their old mutual ratio 3 : 2 — Bhanu bears ₹11,250 and Chandu ₹7,500.

3. Reserve Fund: Anil's share = 5/10 × ₹6,000 = ₹3,000.

4. Intervening profit (Apr 1 – Oct 1, 6 months): ₹15,000 × 6/12 = ₹7,500; Anil's share = 5/10 × ₹7,500 = ₹3,750 (via P&L Suspense).

5. Interest on capital: ₹30,000 × 10% × 6/12 = ₹1,500.

Anil's Capital Account

ParticularsAmount (₹)ParticularsAmount (₹)
To Anil's Executor's A/c57,000By Balance b/d30,000
By Reserve Fund3,000
By Bhanu's Capital A/c (goodwill)11,250
By Chandu's Capital A/c (goodwill)7,500
By Profit & Loss Suspense A/c3,750
By Interest on Capital A/c1,500
Total57,000Total57,000

Anil's Executor's Account

ParticularsAmount (₹)ParticularsAmount (₹)
To Bank A/c (half paid immediately)28,500By Anil's Capital A/c57,000
To Balance c/d28,500
Total57,000Total57,000
✓Final answer

Amount due to Anil = ₹57,000; ₹28,500 paid immediately, ₹28,500 remains as the balance owed to his executors.

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