Deceased Partners Share of Goodwill | Crash Course of Accountancy - Class 12 - Commerce PDF Download

Case 1 
A, B and C are in partnership sharing profits in the ratio of 4:3:1. B died on 30th June 2014.The firm's profits for various years were-2009 (Profits Rs. 12,97,776), 2010 (Profits Rs. 3,20,000), 2011 (Profits Rs. 40,000), 2012 (Losses Rs. 40,000), 2013 (Profits Rs. 1,60,000), 2014 (Profits Rs. 2,00,000). A and C decided to share future profits in the ratio of 3 : 2. Goodwill is to be valued on the basis of 2 years' purchase of average profits of 4 completed years immediately preceding the year of death of a partner. Pass a journal entry to record B's Share to Goodwill. 
[Ans. B's Share of Goodwill Rs. 90,000, GR 4 :11 ]

Case 2 
A, B and C are in partnership sharing profits in the ratio of 4: 3:1. B died on 30th June 2014.The firm's profits for various years were-2009 (Profits Rs. 12,97,776), 2010 (Profits Rs. 3,20,000), 2011 (Profits Rs. 40,000), 2012 (Losses Rs. 40,000), 2013 (Profits Rs. 1,60,000), 2014 (Profits Rs. 2,00,000). A and C decided to share future profits in the ratio of 3 : 2. Goodwill is to be valued on the basis of such partner's share of 2 years' profits calculated on the average of 5 completed years' profits immediately preceding the year of death less 10%. Pass a Journal Entry to record B's share of Goodwill.
[Ans. B's Share of Goodwill Rs. 90,000, GR 4 : 11 ]

Case 3
A, B and C are in partnership sharing profits in the ratio of 4:3:1. B died on 30th June 2014.The firm's profits for various years were-2009 (Profits Rs. 12,97,776), 2010 (Profits Rs. 3,20,000), 2011 (Profits Rs. 40,000), 2012 (Losses Rs. 40,000), 2013 (Profits Rs. 1,60,000), 2014 (Profits Rs. 2,00,000). A and C decided to share future profits in the ratio of 3 : 2. Deceased partner's share of goodwill is to be valued at one half of the net profit credited to his account during the last four completed years immediately preceding the year of death. Pass a journal entry to record B's share of Goodwill.
[Ans. B's Share of Good will Rs. 90,000, GR 4 : 11]

Case 4
A B and C are in partnership sharing profits in the ratio of 4 :3 :1. B died on 30th June 2014.The firm's profits for various years were-2009 (Profits Rs. 12,97,776), 2010 (Profits Rs. 3,20,000), 2011 (ProfitsRs. 40,000), 2012 (LossesRs. 40,000), 2013 (ProfitsRs. 1,60,000), 2014 (Profits Rs. 2,00,000). A and C decided to share future profits in the ratio of 3 : 2. Goodwill is to be valued at three years' purchase of average profits of three years upto the date of death. Pass a Journal Entry to record B's Share of Goodwill.
[Ans. B's Share of Goodwill Rs. 90,000-, GR 4 : 11]

Case 5
Priya, Riya and Siya are partners sharing profits in the ratio of 4:3:1 respectively. It is provided in the partnership deed that on the death of any partner, her share of goodwill was to be valued at half of the profits credited to her account during the four previous completed years.Riya died on 1st January 2014. The firm's profits for the last four years were :
I Rs. 72,000,
II Rs. 48,000,
III Rs. 24,000 and
IV Rs. 48,000.

Determine the amount that should be credited to Riya in respect to her share of goodwill. On the date of Riya's death, one of the old debtors whose account was closed last year by transferring his debt amounting to Rs. 4,800 to bad debts account, has now promised in writing to pay the amount fully.

Pass the necessary journal entries for the above mentioned transactions at the time of Riya's death.
[Ans. Share of Goodwill Rs. 36,000, Share of Profit on Revaluation Rs. 1,800]

Case 6
A, B and C are partners sharing profits in the ratio of 4 : 3 : 1 respectively. It is provided under the 'partnership deed that on the death of any partner his share of goodwill is to be valued at one half of the net profits credited to his account during the last 4 completed years and share of profit to the date of death is to be based on the average profits of the last three completed years, plus 10% (books of accounts are closed on 31st December).

B died on 1st January, 2014. The firm's profits for the last 4 years were as follows: 2010 (Profits Rs. 2,40,000); 2011 (Profits Rs. 1,20,000), 2012 (Losses Rs. 40,000) and 2013 (ProfitsRs. 1,60,000) Pass a journal entry to adjust B's share of Goodwill and Profit assuming that profit sharing ratio between A and C in future will be 3 : 2.
[Ans. Share of Goodwill Rs. 90,000, GR 4: 11, Debits Rs. 24,000, C Rs. 66,000 and Credit B Rs. 90,000, Share of Profit Rs. 6,600]

Deceased Partner’s Capital A/c (time) (share)

Deceased Partner’s executor a/c

Question A, B, and C are partners in a firm sharing profits in the proportion of 3 : 2 : 1. Their Balance Sheet as at 31st March, 2016 stood as follows:

B Died on 30th June, 2016 and according to the deed of the said partnership his executors are entitled to be paid as under:
(a) The capital to his credit at the time of his death and interest there on @ 10% per annum.
(b) His proportionate share of general reserve.
(c) His share of profits for the intervening period will be based on the sales during that period. Sales from 1st April, 2016 to 30th June, 2016 were as  Rs. 12,00,000. The rate of profit during past three years had been 10% on sales.
(d) Goodwill according to his share of profit to be calculated by taking twice the amount of profits of the last three years less 20%. The profit of the previous three years were: 1st Year:  Rs. 82,000; 2nd year:  Rs. 90,000; 3rd year  Rs. 98,000.

(e) The investments were sold at par and his executors were paid out in full.

Prepare B's Capital Account and his Executor's Account.

Solution –

B ‘s capital a/c ( share = 2/6 ) ( time =  3/12)

B’s Partner’s executor a/c