Question

Chandni, Bhanu and Garima were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. The firm closes its books on 31st March every year. On 1st October, 2024, Chandni died. On that date her capital account showed a credit balance of ₹3,00,000. On the date of Chandni’s death, the firm had a general reserve of ₹60,000. The partnership deed provided that on the death of a partner, her representatives will be entitled to the following:
(i) Balance in the capital account and interest on the same @ 10% p.a.
(ii) Her share in the goodwill of the firm. The goodwill of the firm on Chandni’s death was valued at ₹1,20,000
(iii) Her share in the profits of the firm to be calculated on the basis of the previous year’s profit. The profit of the firm for the year ended 31st March, 2024 was ₹4,50,000.
Prepare Chandni’s Capital Account to be presented to her executors.

Hint:

Interest on capital and share of profit till death are calculated proportionately for the period between the start of year and date of death.

Answer 1

Step 1: Capital balance on date of death = ₹3,00,000

Step 2: Interest on capital for 6 months (from 1st April to 1st October)
Interest = ₹3,00,000 × 10% × \( \frac{6}{12} \) = ₹15,000

Step 3: Share in General Reserve
Total reserve = ₹60,000
Chandni’s share = \( \frac{5}{10} \times 60,000 = ₹30,000 \)

Step 4: Share in Goodwill
Goodwill of firm = ₹1,20,000
Chandni’s share = \( \frac{5}{10} \times 1,20,000 = ₹60,000 \)

Step 5: Share in Profit till date of death (6 months)
Previous year’s profit = ₹4,50,000
Profit for 6 months = ₹4,50,000 × \( \frac{6}{12} \) = ₹2,25,000
Chandni’s share = \( \frac{5}{10} \times 2,25,000 = ₹1,12,500 \)

Step 6: Total Due to Chandni’s Executors:

 

Particulars	Amount (₹)
Capital Balance	3,00,000
Add: Interest on Capital	15,000
Add: Share of General Reserve	30,000
Add: Share of Goodwill	60,000
Add: Share of Profit till death	1,12,500
Total Amount Payable	5,17,500