Question

Rajesh, Rakesh, and Mahesh were equal Partners on 31st March 2019. Their Balance Sheet was as follows 31st March 2019.

Balance Sheet as of 31st March 2019

Mr. Rajesh died on 30th June 2019 and the following adjustment was agreed as:

1. Furniture was to be adjusted to its market price of ₹ 3,40,000.

2. Land and Building were to be depreciated by 10%.

3. Provide R.D.D. @ 5% on debtors.

4. The profit up to the date of death of Mr. Rajesh is to be calculated on the basis of last year’s profit which was ₹ 1,80,000.

Prepare:

1. Profit and Loss Adjustment A/c 

2. Partners’ Capital Account 

3. Balance Sheet of the continuing firm.

Answer 1

In the books of the Partnership Firm

Profit and Loss Adjustment Account

Partner’s Capital Account

Balance Sheet as of 1st July 2019

Working Note:

The profit of the firm of last year was ₹ 1,80,000.

Proportionate profit up to the date of death for Rajesh is as follows

= 1,80,000 × \(\frac{3}{12}\times\frac{1}{3}\) (Period) (P & L ratio)

= ₹ 15,000 (Profit and Loss Suspense A/c)