CCP402.58 2
The following amounts will be paid to the
Executor, consequent on death of a partner:
CCP402.58 3
Share in the accumulated reserves
Share in the undistributed profits
Share in the profit of the firm from the last
Balance Sheet to the date of his death
Share in the Joint Life Policy
Salary, if any due to him till the date of his death
CCP402.58 4
Example 1:
A, B and c are partners sharing profits and
losses in the Proportion of 3:2:1 and their Balance
Sheet on 31st Dec, 1985 Was as follows:
Liabilities Rs. Assets Rs.
42,860 42,860
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B died on 28th Feb, 1986 and according to
partnership Agreement his legal representative is
entitled to be paid out as Follows:
The capital to his credit at the time of his death
and interest up to the time of his death at 6% per
annum
His appropriate share of general reserve
CCP402.58 6
His share of profit for the period base d on the
figure of the profit of the previous year
Goodwill according to his share of profits to be
calculate by taking twice the amount of the
average profits of the last three years were 1983
Rs. 7,800 1984 Rs. 9,000 and 1985 of Rs. 9,600
The investments and Bills receivable were
realized and B’s legal representative was paid
off. Pass the necessary Journal entries and
write the account of B
CCP402.58 7
Journal
Rs Rs
Interest a/c Dr. 60-00
To B’s Capital a/c 60-00
(Being the interest at 6% for
2 months credited to B’s capital
account)
General Reserve a/c Dr. 1,000-00
To B’s Capital a/c 1,000-00
(Being the B’s share of General
Reserve credit to his capital
account)
CCP402.58 8
Profit & loss a/c Dr 533-33
To B’s capital a/c 533-33
(Being the profit due to B
up to 28th Feb,1984)
Goodwill a/c Dr
To B’s capital a/c 5,866-67
(Being B’s share of 5,866-67
Goodwill credited)
CCP402.58 9
Bank a/c 13,730-00
Dr 10,430-00
To Investments a/c 3,300-00
To Bills Receivable a/c
(Being the sale proceeds
of Investments and Bills)
13,460-00
B’s Capital a/c 13,460-00
Dr
To Bank a/c
(Being the payment of
amount due To B’s
executors)
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B’s capital A/c
Rs p Rs p
To Bank 13,460-00 By balance b/d 6,000-00
By Interest 60-00
By General Reserve 1,000-00
By Profit & Loss a/c
(profit) 533-33
By Goodwill 5,866-67
13,460-00 13,46-00
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Working Notes:
Calculation of Interest:
Interest on Rs. 6,000 at 6% for 2 months (from
1-1-86 to 28-2-1963)
6000 x 6/100 x 2/12=Rs. 60
Calculation of Profit:
Profit for the year 1985 = 9,600
Profit for 2 months = 9,600 x 2/12
B’s share of Profit = 9,600 x 2/12 x 2/6
= Rs. 533.33 p.
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Calculation of Goodwill:
Total profits for 3 years = 7,800 + 9,000 + 9,600
= 26,400
Average Profit = 26,400/3
= Rs. 8,800
Goodwill being 2 years purchase of Average profits
Of the last Three years = 8800 x 2 = 17,600
B’s share of Goodwill = 17,600 x 2/6
= Rs. 5,866-67 p
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Summary
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Proportionate share in general reserve or
undistributed profits must be credited to his
Capital Account
The amount received in respect of insurance
policy taken by the firm should be credited to the
capital accounts of all the partners in their profit
sharing ratio
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The capital account of the deceased partner
must be debited the amount of drawing and
interest
The capital due to the deceased partner up to the
date of his death is calculated and then placed to
the credit of a separate account opened called
Loan A/c in the name of
his executor
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Quiz
1) Why an executor is appointed on behalf of a death
partner
(a) He knows all the rules about the partnership
Business
(a) To receive and pay all the due amounts to the
death of a partner
(c) To receive and utilize to his personal expenses
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Assignment
1. A,B and C are partners sharing profits and losses in the
proportion of 3:2:1 and their Balance sheet on 31st
December, 2005 was as follows:
Liabilities Rs. Assets Rs.
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Goodwill according to the share of profit to be
calculated taking twice the amount of the
average profit of the last three years were 2003
Rs. 7,800. 2004 Rs. 9.000. 2005 of Rs. 9,600
The investment and B/R were realized and B’s
legal representative was paid off
Pass the necessary journal entries and write the
account of B
CCP402.58 20