‘A’, ‘B’ and ‘C’ were partners sharing profits and losses in the ratio of 3 : 2 : 1 respectively. Their Balance Sheet as on 31st March, 2022 was as follows :Balance Sheet as on 31st March, 2022LiabilitiesAmount (₹)AssetsAmount (₹)Capital Accounts :Bu…

Answer: Revaluation profit ₹ 3,000; C’s share of goodwill ₹ 9,333; C’s share of profit ₹ 1,667; ₹ 37,500 transferred to C’s Executor’s Loan Account.

(a) Profit and Loss Adjustment Account

(c) C’s share of goodwill

Average profit of last 4 years = \(\frac{22{,}000 + 34{,}000 + 24{,}000 + 32{,}000}{4} = \frac{1{,}12{,}000}{4} = ₹\ 28{,}000\)

Goodwill of the firm = 2 × 28,000 = ₹ 56,000. C’s share = \(56{,}000\times\frac{1}{6} = ₹\ 9{,}333\) (rounded). It is credited to C’s Capital Account and debited to A and B in their gaining ratio 3 : 2 (A ₹ 5,600, B ₹ 3,733).

(d) C’s profit up to the date of death

Average profit of last 3 years = \(\frac{34{,}000 + 24{,}000 + 32{,}000}{3} = \frac{90{,}000}{3} = ₹\ 30{,}000\)

Period from 1st April, 2022 to 1st August, 2022 = 4 months. Profit for 4 months = \(30{,}000\times\frac{4}{12} = ₹\ 10{,}000\). C’s share = \(10{,}000\times\frac{1}{6} = ₹\ 1{,}667\) (rounded), debited to Profit and Loss Suspense Account.

Note on rounding: the exact amounts are ₹ 9,333.33 (goodwill) and ₹ 1,666.67 (profit); together they are exactly ₹ 11,000, so rounding them to ₹ 9,333 and ₹ 1,667 keeps C’s Capital Account balance at exactly ₹ 37,500.

(b) C’s Capital Account