It was provided under the Partnership Agreement between Amar, Akbar and Anthony that in the event of death of a partner, the survivors would have to…
CA Foundation · Accounting · MTP · January 2026
It was provided under the Partnership Agreement between Amar, Akbar and Anthony that in the event of death of a partner, the survivors would have to purchase his share in the firm on the following terms: (i) Goodwill is to be valued at 3 year's purchase of simple average profits of last4completed years. (ii) Outstanding amount due to the representative of a deceased partner shall be paid in4equal half yearly installments commencing6 months after the death plus interest @5% p.a. on the outstanding dues. They shared profit and loss in the ratio 9:4:3. Amar died on 30th September, 2025 and Partner's Capital account balances on that date were: Amar -21,600, Akbar -12,800 and Anthony -7,200. Amar's current account on 30th September, 2025 after crediting his share of profit to that date, however showed a debit balance of 1,920. Firm profits were for the year ended -31st March, 202270,400 -31st March, 202356,320 -31st March, 202448,160 -31st March, 2025· ₹ 17,408 Show Amar’s Capital Account and Executor's Account (of Amar) till full payment is made to Amar's Executor. Figures are to be rounded off to the nearest rupee.
Suggested Answer and Working Notes:
Amar’s Capital Account Date Particulars ₹ Date Particulars ₹ 2025 Sep.30 To Amar’s current Account 1,920 2025 Sep.30 By bal b/d 21,600 Sep.30 To Amar’s Executor A/c 1,00,802 Sep.30 By Anthony Capital A/c and Akbar Capital A/c (Share of goodwill) 81,122 1,02,722 1,02,722 Amar’s executor Account Date Particulars Amount ₹ Date Particulars Amount ₹ 31.3.2025 To Bank A/c (₹ 25,200+2,520) 27,720 1.10.2025 By Capital A/c 1,00,802 31.3.2026 By Interest (₹ 1,00,802 x 2.5%) 2,520.00 To Balance c/d 75,602 1,03,322 1,03,322 30.9.2026 To bank A/c (₹ 25,200+1,890) 27,090 1.4.2026 By Balance b/d 75,602 30.9.2026 By Interest (₹ 75,601 x 2.5%) 1,890 31.3.2027 To bank A/c (₹ 25,200 +1,260) 26,460 30.3.2027 By Interest (₹ 25,200 x 2) x 2.5% 1,260 31.3.2027 To balance c/d 25,202 78,752 78,752 30.9.2027 To bank A/c (₹ 25,200+630) 25,832 1.4.2027 By balance b/d 25,202 30.9.27 By Interest (₹ 25,200 x 2.5%) 630 25,832 25,832 Working notes 1. Ascertainment of Value of Goodwill Particulars ₹ 2022 70,400 2023 56,320 2024 48,160 2025 17,408 Total Profit for4 years 1,92,288 Average Profit 48,072 Goodwill -3 years Purchase of Average Profit 1,44,216 Amar’s Share of goodwill (₹ 9/16 of 1,44,216) 81,122 *Profit sharing ratio between Amar, Akbar and Anthony = 9:4:3, Therefore Amar’s share of Profit = 9/16 2. Calculation of amount of each instalment (without interest) = 1,00,802 /4 = 25,200.50 (Round off to 25,200)
Topics: Death of a Partner
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