18 :- X, Y and Z were partners in a firm. Z died on 31st May, 2025 . His share of profit from the closure of the last accounting year till the death was to be calculated on the basis of the average of three completed years of profits before death. Profits for the years ended 31st March, 2023, 2024 and 2025 were Rs 18,000, Rs 19,000 and Rs 17,000 respectively.
Calculate Z’s share of profit till his death and pass the necessary journal entry for the same when :
(i)Profit- sharing ratio of remaining partners does not change and
(ii)Profit sharing ratio of remaining partners changes and new ratio being 3:2.
Solution :-
WORKING NOTES :-
(i) Calculation of Z’s share of profit till his death
Average profit of three years before Z’s death = 18,000 + 19,000 + 17,000/3
= 54,000/3
= Rs 18,000
Z’s share of profit = 18,000 x 1/3 x 2/12 = Rs 1,000
(ii) Calculation of gaining share of X and Y (CASE 2)
X = 3/5 – 1/3 = 4/15
Y = 2/5 – 1/3 = 1/15
Gaining ratio of X and Y is 4:1