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Important Questions - Death (Accounting for Partnership Firms and Companies) | Accountancy Class 12 - Commerce PDF Download

Chapter - Death

Important Questions

Q1. On 31st March 2015 the Balance Sheet of Punit, Rahul and Seema was as follows

Important Questions - Death (Accounting for Partnership Firms and Companies) | Accountancy Class 12 - Commerce

They were sharing Profit and loss in the ratio 5:3:2.
 Seema died on October 1, 2015. It was agreed between her executors and the remaining partners that:
 i. Goodwill be valued at 2 years’ purchase of the average profits of the previous five years, which were:
 2010-11: 30,000; 2011-12: 26,000; 2012-13: 24,000; 2013-14: 30,000 and 2014-15: 40,000.
 ii. Patents be valued at 16,000; Machinery at 56,000; Buildings at 60,000.
 iii. Profit for the year 2015-16 be taken as having been accrued at the same rate as that in the previous year.
 iv. Interest on capital be provided at 10% p. a.
 v. A sum of 15,500 was paid to her executors immediately.
 Prepare Revaluation Account, Seema’s Capital Account and Seema’s executors Account.

(6)

Q2. A, B and C are partners in a firm sharing profits in the ratio of 5 : 3 : 2 respectively. Their Balance
 Sheet as on 31st December, 2012 was as follows :

Important Questions - Death (Accounting for Partnership Firms and Companies) | Accountancy Class 12 - Commerce

A died on 1st October, 2013, due to illness. It was agreed between the firm and A‖s executors that the amount due
 to A will be used for construction of a Charitable Hospital in a village. As per the agreement :
 (i) Goodwill was valued at 2 years purchase of average profits of last 4 years, which were : 2009 – Rs. 1,00,000; 2010 – Rs. 1,60,000; 2011 – Rs. 1,80,000
 ii) Patents were revalued at Rs. 90,000; Machinery at Rs. 2,80,000 and Building at Rs. 2,50,000.
 (iii) A‖s share of profit till the date of his death will be calculated on the basis of the profit of the year 2012.
 (iv) Interest on capital will be provided at 10% p.a.
 (v) Amount due to A’s executors will be transferred to Charity account.
 Prepare a capital account to be presented to his executor.

(6)

Q3. Nithya, Sathya and Mithya were partners sharing profits and losses in the ratio of 5:3:2. Their Balance
 Sheet as on December 31, 2002 was as follows :

(8)

Balance Sheet at December 31, 2002

Important Questions - Death (Accounting for Partnership Firms and Companies) | Accountancy Class 12 - Commerce

 

Mithya dies on May 1, 2002. The agreement between the executors of Mithya and the partners stated that :
 (a) Goodwill of the firm be valued at 2 ½ times the average profits of last four years. The profits of four
 years were : in 1998, Rs.13,000; in 1999, Rs.12,000; in 2000, Rs.16,000; and in 2001, Rs.15,000.
 (b) The patents are to be valued at Rs.8,000, Machinery at Rs.25,000 and Premises at Rs.25,000.
 (c) The share of profit of Mithya should be calculated on the basis of the profit of 2002.
 (d) Provide interest @ 12% p.a. on capital.

The document Important Questions - Death (Accounting for Partnership Firms and Companies) | Accountancy Class 12 - Commerce is a part of the Commerce Course Accountancy Class 12.
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FAQs on Important Questions - Death (Accounting for Partnership Firms and Companies) - Accountancy Class 12 - Commerce

1. What is the difference between death accounting for partnership firms and companies?
Ans. Death accounting for partnership firms involves the settlement of the deceased partner's accounts, distribution of profits and losses, and the adjustment of capital accounts among the remaining partners. In contrast, death accounting for companies usually involves the transfer of shares held by the deceased shareholder to their legal heirs or liquidation of their shares.
2. How is the value of a deceased partner's share determined in partnership firms?
Ans. The value of a deceased partner's share in a partnership firm is determined based on the provisions of the partnership agreement. Generally, the value is calculated by considering the deceased partner's capital balance, share in undistributed profits, and goodwill share (if applicable). The remaining partners may also agree to use a mutually accepted method for valuation.
3. What happens to the deceased partner's share of profits or losses in a partnership firm?
Ans. In a partnership firm, the deceased partner's share of profits or losses until the date of their death is usually credited or debited to their capital account. The amount is then distributed among the remaining partners in proportion to their profit-sharing ratios. The share of profits or losses after the date of death is borne by the remaining partners.
4. Can a deceased partner's legal heirs become partners in a partnership firm?
Ans. Yes, the legal heirs of a deceased partner can become partners in a partnership firm if the other partners agree to admit them. The admission of legal heirs as partners usually requires the consent of all existing partners and may involve the reconstitution of the partnership firm. The terms of their admission, such as capital contribution and profit-sharing ratio, are determined through negotiation.
5. What is the process of transferring shares in a company after the death of a shareholder?
Ans. The process of transferring shares in a company after the death of a shareholder involves several steps. The legal heirs of the deceased shareholder need to obtain a succession certificate or probate of the will, depending on the applicable laws. They then need to submit the necessary documents, such as the death certificate, succession certificate, and share transfer form, to the company's registrar or transfer agent. Upon verification, the shares are transferred to the legal heirs' names, enabling them to exercise the rights and receive dividends as shareholders.
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