NOTES

Explain distinction between retirement and death of a partner as relating to finalisation of amount payable.

1.    The balance sheet of seed, plant and Flower as at 31^st December,2016 was as under:

Peter, Paul and prince were partners sharing profits and losses in the ratio 2:1:1. It was provided in the partnership deed that in the event of retirement/death of a partner he/his legal representatives would be paid:

(i)The balance in the capital account

(ii) His share of goodwill of the firm valued at two years purchase of normal average profits (after charging interest on fixed capital) for the last three years to 31^st December  preceding the retirement or death.

(iii) His share of profits from the beginning of the accounting year of to the date of retirement or death which shall be taken on proportionate basis of profits of the previous year as increased by 25%

(iv) Interest on fixed capital at 10% p.a through payable to the partners will not be payable in the year of death or retirement.

(v) All the assets are to be valued on the date of retirement or death and the profit and loss be debited/credited to the capitals accounts in the profit sharing ratio.

Peter died on 30^th September,2016. The books of accounts are closed on calendar year basis from 1^st january to 31^st December.

The balance in the Fixed Capital Accounts as on 1^st January,2016 were peter Rs.10,000,paaul Rs.5,000 and Prince Rs.5,000. The balance in the current account as on 1^st January,2016 were Peter Rs.20,000, Paul Rs.10,000 and Prince Rs.7,000. Drawings of peter till 30^th September,2016 were Rs.1,00,000, Rs.1,20,000 and Rs.1,50,000 respectively. The profits include the following abnormal items of credit:-

Samita, Sangita and Savita were partners sharing profits and losses in the ratio of 2:2:1. Balance Sheet as on 31^st December, 2012 was as follows:

Balance Sheet As on 31^st December, 2012 

Sangita died on 31^st March, 2013. The following adjustments were made in the books of the firm:

1.  R.D.D. is no longer necessary.

2.  Investments worth Rs. 15,000 were taken over by Savita and remaining investments were sold at a profit of Rs. 1,000.

3.  Stock was valued at Rs. 22,500 and Plant and Machinery was depreciated by 10%.

4.  A contingent liability for compensation Rs. 535 is to be provided.

5.  Goodwill of the firm was valued at Rs. 15,000. It should be raised and w. off

6.  The deceased partner’s share in profit up-to the date of death was to be calculated on the basis of last year’s profit which was Rs. 12,000.

Prepare Profit & Loss Adjustment Account, Partner’s Capital Account and Balance Sheet as on 1^st April, 2013.

Chaya, Maya and Ria were partners sharing profits and losses in the ratio of 4:3:3. Their Balance sheet was as follows:

 Balance Sheet as on 31/03/2012 

Ria died on 31/7/12 and the following terms were agreed:

(1)Goodwill is to be valued at two years purchase of the average profit for the last five years. Trading results were: 07-08 Rs. 6,000 (P), 08-09 Rs. 8,000 (P), 09-10 Rs. 18,000 (P), 10-11 Rs. 9,000 (L), 11-12 Rs.12,000 (P).

(2)  Profit up-to the date of Ria’s death to be calculated on the basis of last year’s profit.

(3)  Sundry assets to be appreciated by 10% and stock to be depreciated by Rs. 1,500.

(4)  All the debts are good and provision for doubtful debts is no longer necessary.

(5)  An item of Rs. 2,000 included in creditors no longer a liability and should be written off.

(6)  Amount due to Ria is to be transferred to executor’s loan.

Prepare : (1) Revaluation Account  (2) Ria’s Capital Account