Madhav, Raghav and Purav were partners in a firm sharing profits and losses in the ratio of 3 : 1 : 1. Their Balance Sheet as at 31st march, 2023 was as follows:
Balance Sheet of Madhav, Raghav and Purav as at 31st March, 2023
| Liabilities | ₹ | Assets | ₹ |
| Creditors | 1,00,000 | Bank | 20,000 |
| General Reserve | 50,000 | Stock | 1,10,000 |
| Capitals: Madhav Raghav Purav |
60,000 1,00,000 40,000 |
Investment | 70,000 |
| Furniture | 35,000 | ||
| Building | 1,15,000 | ||
| 3,50,000 | 3,50,000 |
Purav died on 30th September, 2023. According to Partnership deed, his legal representatives are entitled to the following:
- Balance in his Capital Account.
- Share of profit up to the date of death to be calculated on the basis of last year’s profit.
- Share of goodwill calculated on the basis of three years purchase of average profits of last four years.
- Interest on Capital @ 12% p.a.
Purav’s share of profit was ₹ 3,000 and the average profit of last four years was ₹ 50,000. Purav’s drawings up to the date of death were ₹ 10,000.
Prepare Purav’s Capital Account to be rendered to his legal representatives.
[Ans.: Purav’s Share of Goodwill – ₹ 30,000; Purav’s share of Profit – ₹ 3,000; Balance of Purav’s Capital A/c transferred to Purav’s Executors’s A/c – ₹ 75,400.]
Solution:-
