33 :- Arun, Bhima and Nakul are partners in a firm sharing profits in the ratio of 1:1:3. Their capital accounts showed the following balances on 1st April, 2022 :
Arun – Rs 2,00,000 ; Bhim – Rs 1,50,000 and Nakul – Rs 4,50,000
Firm closes its accounts every year on 31st March. Bhim died on 31st March 2023. In the event of death of any partner, the partnership deed provides for the following :
(i) Interest on capital will be allowed to deceased partner only fro the first of day of the accounting year till the date of his death @10% p.a.
(ii) The deceased partner’s share of goodwill of the firm will be calculated on the basis of 2 years purchase of the average profit of the last three years. The profits of the firm for the last three years ended 31st March, were : 2021 – Rs 90,000; 2022 – Rs 2,00,000 and 2023 – Rs 1,60,000
(iii) His share of profits till the date of death : The profit of the firm for the year ended 31st March, 2023 was Rs 1,60,000 before providing for interest on capital. Bhim’s executor was paid the sum due in two equal annual installments with interest @10% p.a.
Prepare Bhim’s capital accounts as on 31st March, 2023 to be presented to his executor and his executor’s loan account for the year ending 31st March, 2024 and 31st March, 2025.
Solution :-
WORKING NOTES :-
(i) Calculation of goodwill of the firm
Goodwill of the firm = 90,000 + 2,00,000 + 1,60,000/3
= 4,50,000/3 x 2
= Rs 3,00,000
(ii) Calculation of partner’s share in goodwill
Bhim’s share of goodwill = 3,00,000 x 1/5 = Rs 60,000
Arun and Nakul will contribute it in gaining ratio I.e, 1:3
Arun will contribute = 60,000 x 1/4 = Rs 15,000
Nakul will contribute = 60,000 x 3/4 = Rs 45,000
(iii) Calculation of Bhim’s share of profit
Net profit after interest on capital = 1,60,000 – 15,000
= Rs 1,45,000
Bheem’s share in profit = 1,45,000 x 1/5
= Rs 29,000