The Balance Sheet of Sudha, Rahim and Kartik who were sharing profit in the ratio of 3:3 4 as on 31st March, 2012 was as follows:
Sudha died on June 30th 2012. The partnership deed provided for the following on the death of a partner:
(a) Goodwill of the firm be valued at two years purchase of average profits for the last three years.
(b) Sudha’s share of profit or loss till the date of her death was to be calculated on the basis of sales. Sales for the year ended 31st March, 2012 amounted to Rs 4,00,000 and that from 1stApril to 30th June 2012 to Rs 1,50,000. The profit for the year ended 31st March, 2012 was Rs 1,00,000.
(c) Interest on capital was to be provided @ 6% p.a.
(d) The average profits of the last three years were Rs 42,000.
(e) According to Sudha’s will, the executors should donate her share to Matri Chhaya an orphanage for girls.
Prepare Sudha’s Capital Account to be rendered to her executor. Also identify the value being highlighted in the question.
Working Notes:
1) Calculation of Sudha’s Share of Goodwill
Goodwill of Firm = Average profits x 2 years purchase of average profit
= 42,000 x 2 = 84,000
Sudha’s share of goodwill = 84000 * 3/10 =25,200
2) Interest on sudha’s capital = 60000 * 6 /100 * 3/12 = 900
3) Calculation of Sudha’s Share of profits
If sales = 4,00,000
Profit = 1,00,000
If sales is 1, profit = 1,00,000 / 4,00,000
Profit = (1,00,000/4,00,000) * 1,50,000 = 37,500
Sudha’s Share = 37500 x 3/10 = 11,250
Values Involved in the given scenario:
(1) Sympathy, empathy and helping orphans.
(2) Fulfilment of social responsibility
State the provisions of Indian Partnership Act regarding the payment of remuneration to a partner for the services rendered.
Ali, Bimal and Deepak are partners in a firm. On 1st April, 2011 their capital accounts stood at Rs. 4,00,000, Rs. 3,00,000 and Rs. 2,00,000 respectively. They shared profits and losses in the proportion of 5:3:2. Partners are entitled to interest on capital @ 10% per annum and salary to Bimal and Deepak @ 2,000 per month and Rs. 3,000 per quarter respectively as per the provisions of the partnership deed.
Bimal's share of profit (excluding interest on capital but including salary) is guaranteed at a minimum of Rs. 50,000 p.a. Any deficiency arising on that account shall be met by Deepak. The profits of the firm for the year ended 31st March, 2012 amounted to Rs. 2,00,000. Prepare Profit & Loss Account for the year ended on 31st March, 2012.
Arun and Arora were partners in a firm sharing profits in the ratio of 5:3. Their fixed capitals on 1-4-2010 were: Arun Rs 60,000 and Arora Rs 80,000. They agreed to allow interest on capital @ 12% p.a. And to charge on drawings @ 15% p.a. The profit of the firm for the year ended 31-3 2011 before all above adjustments were Rs 12,600. The drawings made by Arun were Rs 2,000 and by Arora Rs 4,000 during the year. Prepare Profit and Loss Appropriation Account of Arun and Arora. Show your calculations clearly. The interest on capital will be allowed even if the firm incurs loss.
When the partner capitals are fixed, where the drawing made by a partner will be recorded?
