Death of a Partner

Death of a partner
Death comes unexpectedly. It can happen any time
during a financial year.

Exit of a partner can create a vacuum in

management and a financial emergency.

Accounting treatment for retirement and death are

almost the same

When the partner dies the amount payable to

him/her is paid to his/her legal representatives.
 Problems at the time of death of a
partner

Calculation of
Share of Undistributed
deceased partner
share of profit goodwill profits

Preparation of
Interest on
Executer
capital/Drawings
account
Items which are credited to deceased painter's
capital account

1 Amount standing to the credit of his

capital
2
His share of goodwill
3
Interest on capital upto the date of death
4

Share of profit on revaluation

5

6 Share of undistributed profits

7 Share of profit upto the date of death

Items which are debited to deceased painter's
capital account

1
Drawings

2
Interest on drawing upto the date of death

3
Share of loss on revaluation

4 Share of goodwill already appears written

off
5
Share of undistributed loss
Common topics in retirement and death of a
partner

Retiremen
Death of
t of
partner
partner

Amount standing to the

credit of his capital

Profit sharing ratio

Share of goodwill

Share of profit on
revaluation

Share of undistributed
profits
 Format of deceased partners capital A/c

Partners capital
Particulars A/c
Amount Particulars Amount

By Balance b/d
By Workmen Compens
Fund
By Reserves
By Profit and loss (Cr)

Balance of capital Share in

as per balance undistributed
sheet profits
 Format of deceased partners capital A/c

Partners capital
Particulars A/c
Amount Particulars Amount

By Balance b/d
By Workmen Comp
Fund
By Reserves
By Profit and loss (Cr)
By Revaluation
( profit)
By Interest On Capital

Profit on Interest on capital

revaluation (till date of death)
 Format of deceased partners capital A/c

Partners capital
Particulars A/c
Amount Particulars Amount

By Balance b/d
By Workmen Comp
Fund
By Reserves
By Profit and loss (Cr)
By Revaluation
( profit)
By Interest On Capital
By Profit and loss
suspense

Share of profit (till

date of death)
 Format of deceased partners capital A/c

Partners capital
Particulars A/c
Amount Particulars Amount

By Balance b/d
By Workmen Comp
Fund
By Reserves
By Profit and loss (Cr)
By Revaluation
( profit)
By Interest On Capital
By Profit and loss
suspense
By A’s capital
By B’s capital

Share of goodwill
 Format of deceased partners capital A/c

Partners capital
Particulars A/c
Amount Particulars Amount
To Goodwill By Balance b/d
To Revaluation By Workmen Comp
Fund
By Reserves
By Profit and loss (Cr)
By Revaluation
( profit)
By Interest On Capital

By Profit and loss

suspense
By A’s capital
By B’s capital

Goodwill already
appears written off Loss on revaluation
 Format of deceased partners capital A/c

Partners capital
Particulars A/c
Amount Particulars Amount
To Goodwill By Balance b/d
To Revaluation By Workmen Comp
To Profit and Fund
By Reserves
loss
To Drawings By Profit and loss (Cr)
To Interest on By Revaluation
drawing ( profit)
By Interest On Capital
By Profit and loss
suspense
By A’s capital
By B’s capital

Dr balance of profit
Drawing and
and loss (balance
interest on drawing
sheet)
( till date of death)
 Format of deceased partners capital A/c

Partners capital
Particulars A/c
Amount Particulars Amount
To Goodwill By Balance b/d
To Revaluation By Workmen Comp
To Profit and Fund
By Reserves
loss
To Drawings By Profit and loss (Cr)
To Interest on By Revaluation
drawing
To Executer A/c ( profit)
By Interest On Capital
( balancing figure)
By Profit and loss
suspense
By A’s capital
By B’s capital

Balance
transferred to
Executer A/c
 Deceased partner share in
Profit

Time Basis Sales Basis

Problem Time
Basis
A ,B and C books closes on march 31st March. A died on 30th
June 2009 and share of profits of a deceased partner up to the
date of death to be calculated on the basis of the average profits
for the last five years. The profits for the last 5 years are.

2005- Rs 14,000 - 2006- Rs 18,000 - 2007- Rs 16,000

2008 - Rs 10,000 (Loss) - 2009- 16,000

Calculate A’s share of the profits up to the date of death and

pass necessary journal entry

Average = Total profits

profits No of years

Total profit = 14,000 + 18,000 + 16,000 – 10,000

+16000
= 54,000

Average = 54,000 = 10,800

profits 5
Problem Time
Basis
A ,B and C books closes on march 31st March. A died on 30th
June 2009 and share of profits of a deceased partner up to the
date of death to be calculated on the basis of the average profits
for the last five years. The profits for the last 5 years are.

2005- Rs 14,000 - 2006- Rs 18,000 - 2007- Rs 16,000

2008 - Rs 10,000 (Loss) - 2009- 16,000

Calculate A’s share of the profits up to the date of death and

pass necessary journal entry

Particulars Dr Amount Cr Amount

Profit and loss Suspense A/c Dr. 900
To A Capital A/c 900
(A share of profit till the date of death )

Share of A upto = 10,800 x 3 x 1

= 900
the date of death 12 3
Problem Time
A ,B and Basis
C share profits in 3:2:1.The firm closes its books on
31st March every year. B died on 12th June 2007. On B’s death
the goodwill of the firm valued at Rs 60,000. On B’s death his
share in the profits of the firm will the time of his death was to
be calculated on the basis of previous year profits which was
Rs 1,50,000. Calculate B share in the profits of the firm. Pass
necessary journal entries for the treatment of goodwill and B’s
share of profits at the time of his death.

60,000 x 2
B share of = = 20,000
goodwill 6

Number of days from March 31st to June 12 = 73 days

B’s share of profits = 1,50,000x 73 x 2

= 10,000
upto the date of death 365 6
Problem Time
A ,B and Basis
C share profits in 3:2:1.The firm closes its books on
31st March every year. B died on 12th June 2007. On B’s death
the goodwill of the firm valued at Rs 60,000. On B’s death his
share in the profits of the firm will the time of his death was to
be calculated on the basis of previous year profits which was
Rs 1,50,000 Calculate B share in the profits of the firm. Pass
necessary journal entries for the treatment of goodwill and B’s
share of profits at the time of his death.

Particulars Dr Amount Cr Amount

Profit and loss Suspense A/c Dr. 10,000

To A Capital A/c 10,000

(B share of profit till the date of death )

A capital A/c Dr. 15,000
C capital A/c Dr. 5,000
To B capital A/c 20,000

(for retiring partner share of goodwill

transferred from remaining partners capital
in GR )
Problem Sales
A ,B and Basis
C are sharing profits in the ratio of 3:2:1. C died on
31th June 2011 accounts are closed on 31st march every year.
Sales for the year ending 31st march 2011 amounting to
6,00,000. Sales from 1st April 2011 to 30th June 2011
amounted to Rs 2,40,000. The profits for the year ending 31st
march 2011 amounted to 30,000. Calculate the deceased
partner share in the current year’s profits.

If sale is 6,00,000 Than profit is 30,000

Cross multiplication

If sale is 2,40,000 Than profit is X

X (profit) 30,000
= X 2,40,000 = 12,000
6,00,000
Problem Sales
A ,B and Basis
C are sharing profits in the ratio of 3:2:1. C died on
31th June 2011 accounts are closed on 31st march every year.
Sales for the year ending 31st march 2011 amounting to
6,00,000. Sales from 1st April 2011 to 30th June 2011
amounted to Rs 2,40,000. The profits for the year ending 31st
march 2011 amounted to 30,000. Calculate the deceased
partner share in the current year’s profits.

Particulars Dr Amount Cr Amount

Profit and loss Suspense A/c Dr. 2,000
To C Capital A/c 2,000
( C share o profit till the date of death )

Share of A upto = 12,000 x 1

= 2,000
the date of death 6
Comprehensive
Questions
Proble
mA, B and C were partners sharing profits in a firm sharing
profits in 3:2:1 ratio.

B died on 30th June 2011. Under the partnership deed the

executer of the deceased partner are entitled to.

1. His capital as per balance sheet

2. Interest on capital @ 10% up to the date of death
3. His share of profit to the date of death calculated on the
basis of last year profit
4. B capital on 31st march was Rs 40,000 and from 1st April
2011 he has withdrawn 1,200 per month at the beginning of
each month. Interest on drawing is to be charged @ 10%
p.s. last year profit was Rs 24,000.
Working Notes Interest on capital

x 3 10
Interest on capital = 40,000 x = 1,000
12 100

Share of profit

= 24,000 x 3 x 2 2,000
Share of profit =
12 6

B’s Capital A/c

Particulars Amount Date Particulars Amount

By Balance b/d 40,000

By Interest On 1,000
Capital
By Profit And Loss
Suspense Account 2,000
Working Notes
Interest on drawings

= 1,200 x 3 x 10 = 30
12 100

= 1,200 x 2 x 10 = 20
12 100

= 1,200 x 1 x 10 = 10
12 100

60

B’s capital A/c

Particulars Amount Date Particulars Amount

To Drawings 3,600 By Balance b/d 40,000

To interest on 60 By Interest On 1,000
Drawings
To B’s Executer A/c Capital
By Profit And Loss
39,340 2,000
balancing figure Suspense Account

43,000 43,000
Proble
mA B and C are partners with effect from 1st April 2011.

Furniture Rs 18,000
Machinery Rs 72000
Cash Rs 10,000
Debtors Rs 20,000.

Their profit sharing ratio was 5:3:2. Capital is also shared in

the same ratio. B died on 30th September 2011 his son
claimed his father interest in the firm.
1. Allow his capital to his credit on his date of death
2. Give 5% p.a. interest on capital
3. He had been drawing @ 600 per month which he withdrew
at the beginning of each month. He to allow to retain these
drawing as a part of his share of profit
4. Interest @ 6% p.a. be charged on his drawings

Goodwill was evaluated twice the average of profits which

were Rs 21,000. Prepare B’s personal account.
 Memorandum balance
Liabilities sheet
Rs. Assets Rs.
Capital A/c ( balancing Cash 10,000
1,20,000
fig). Debtors 20,000
5
A’s capital 1,20,000 x =60,000 Furniture 18,000
10
Machinery 72,000
B’s capital 1,20,000 x 3
=36,000
10
2
C’s capital 1,20,000 x =24,000
10
1,20,000 1,20,000
B’s Capital A/c
Particulars Amount Date Particulars Amount

By Balance b/d 36,000

Working Notes Interest on capital

Interest on capital = 36,000 x 3 x 10

= 900
12 100

B’s Capital A/c

Particulars Amount Date Particulars Amount

By Balance b/d 36,000

By Interest On 900
Capital
 Working Notes Share of goodwill
Goodwill = 21,000 x 2 42,000
=
3
B’s share of goodwill = 42,000 x = 12,600
10
Particulars Dr Amount Cr Amount

A capital A/c Dr. 9,000

C capital A/c Dr. 3,600
To B capital A/c 12,600
(for deceased partner share of goodwill
transferred from remaining partners capital
in GR)
B’s Capital A/c
Particulars Amount Date Particulars Amount

By Balance b/d 36,000

By Interest On 900
Capital
By A’s Capital 9,000
By C’s Capital 3,600
Working Notes Interest on drawings

= Total x 6 +1 x Rate
drawings 2 100

= 3600 x 6 +1 x 10
= 63
2 100

Note:- Total drawing = Share of profit of deceased partner( Given)

3600 = 3600

B’s Capital A/c

Particulars Amount Date Particulars Amount

To Drawings 3,600 By Balance b/d 36,000

To interest on 63 By Interest On 900
Drawings
To B’s Executer A/c Capital 9,000
49,437 By A’s Capital
(balancing figure)
By C’s Capital 3600

By P/L Suspense 3,600

Acc

53,100 53,100
 Pushpa , rashi and seema shares P/L in the ratio of
2:1:2.
Liabilities Rs. Assets Rs.
Pushpa 1,20,000 Land and Building 2,00,000
Rashi 80,000 Stock 65,000
Seema 1,00,0000 40,000 Bank 65,000
Creditors 38,000 Debtors 30,000
Profit and loss account 60,000 Goodwill 40,000
Employee provident fund 2,000

1. Pushpa died on June 12th 2007 and according to deed of the

partnership his executors are entitled to be paid as under.
2. The capital to his credit and interest at rate of 8%
3. Share of reserve funds
4. Her share of goodwill valued on the basis of two times the
average profits of the past 3 years.
5. Her share of profits up to the date of death on the basis of
average profit for the last 3 years.
6. Profit of the past 3 years were Rs 30,000 Rs 70,000 and Rs
80,000 respectively. Rashi and Seema acquired Pushpa share in
the ratio of 1:5.
 Ledger Posting
Liabilities Amount Assets Amount
Pushpa 1,20,000 Land and Building 2,00,000
Rashi 80,000 Stock 65,000
Seema 1,00,0000 40,000 Bank 65,000
Creditors 38,000 Debtors 30,000
Profit and loss account 60,000 Goodwill 40,000
Employee provident fund 2,000

Pushpa capital A/c

Particulars Amount Date Particulars Amount

To Goodwill (written 16,000 By Balance b/d 1,20,000

off)
By profit and loss 24,000
A/c
Working Notes Interest on capital

Number of days from March 31st to June 12 = 73 days

Interest on capital = 1,20,000x 73 x 8

= 1920
365 100

Pushpa capital A/c

Particulars Amount Date Particulars Amount

To Goodwill (written 16,000 By Balance b/d 1,20,000

off)
By profit and loss 24,000
A/cinterest on
By 1,920
capital
Working Notes Share of profit

Number of days from March 31st to June 12 = 73 days

30,000 + 70,000 +
Average = = 60,000
80,000
profits 3

Share of profit = 60,000 x 73 x 2 4,800

=
365 5

Pushpa capital A/c

Particulars Amount Date Particulars Amount

To Goodwill (written 16,000 By Balance b/d 1,20,000

off)
By Profit and loss 24,000
A/cInterest on
By 1,920
capital
By Profit and loss
suspense account 48,00
 Working Notes Share of goodwill

30,000 + 70,000 +
Average = = 60,000
80,000
profits 3
Goodwill = 60,000 x 2 = 1.20,000

x 2
Pushpa share of = 1,20,000 = 4,8000
goodwill 5

Pushpa capital A/c

Particulars Amount Date Particulars Amount

To Goodwill (written 16,000 By Balance b/d 1,20,000

off)
By profit and loss 24,000
A/cInterest on
By 1,920
capital
By Profit and loss
suspense account 48,00
 Working Notes

Particulars Dr. Amount Cr. Amount

Rashi’s Capital A/c Dr. 8,000
Seema Capital A/c Dr. 40,000
To Pushpa Capital A/c 48,000
Adjustment of goodwill in GR = 3:1

Pushpa capital A/c

Particulars Amount Date Particulars Amount

To Goodwill (written 16,000 By Balance b/d 1,20,000

off) 1,82,720
To Pushpa Executer By profit and loss 24,000
A/c balancing figure A/cInterest on
By 1,920
capital
By Profit and loss
suspense account 48,00
By Rashi capital 8,000
By Seema capital 40,000
1,98,720 1,98,720
 A , B and C are partners in a firm
Liabilities Rs. Assets Rs.
Sundry Creditors 18,000 Tools 6,000
Workmen compensation
19,200 Furniture 48,000
fund
A Capital 60,000 Stock 36,000
B Capital 30,000 Debtors 36,000
C Capital 30,000 Cash at bank 30,000
Cash in hand 1200
B died on 31st march 2005. Under the partnership
agreement the executer of B was entitled to
1. Amount standing to the credit of his capital account
2. Interest on capital which amounted to Rs 375
3. His share in goodwill Rs 21000
4. His share in profit from the closing of the last financial
year to the date of death which amounted Rs 2625
5. B executer was paid Rs 20,400 on the same date.
 Liabilities Rs. Assets Rs.
Sundry Creditors 18,000 Tools 6,000
Workmen compensation
19,200 Furniture 48,000
fund
A Capital 60,000 Stock 36,000
B Capital 30,000 Debtors 36,000
C Capital 30,000 Cash at bank 30,000
Cash in hand 1200

B’s Capital A/c

Particulars Amount Date Particulars Amount

By Balance b/d 30,000

 Working Notes
Particulars Dr. Amount Cr. Amount
Workmen compensation fund 6,400
To B’s capital 6,400
Retiring partners share in workmen
compensation fund

B’s share workmen = 19,200 x 1 = 6,400

compensation fund
3

B’s Capital A/c

Particulars Amount Date Particulars Amount

By Balance b/d 30,000

By workmen 6,400
comp fund
 Working Notes
Particulars Dr. Amount Cr. Amount
Interest on capital Dr. 375
To B’s capital 375
Retiring partners interest on capital till
the date of death

Profit and loss suspense A/c Dr. 2625

To B’s capital 2625
Retiring partners share in profit till
the date of death
B’s Capital A/c
Particulars Amount Date Particulars Amount

By Balance b/d 30,000

By workmen 64,00
comp fund
By interest on 375
capital
By P/L suspense acc 2,625
 Working Notes
Particulars Dr. Amount Cr. Amount
A’s capital 10,500
C ‘s capital 10,500
To B’s capital 21,000

Retiring partners share of goodwill

B’s capital A/c Dr. 60,400
To B’s executer A/c 60,400
Amount due to B transferred to his
executer Account.
B’s Capital A/c
Particulars Amount Date Particulars Amount

To B’s executer 60,400 By Balance b/d 30,000

A/c
By workmen 64,00
comp fund
By interest on 375
capital
By P/L suspense acc 2,625
By A’s Capital 10,500
By B’s Capital 10,500
60,400 60,400
 B’s Capital A/c
Particulars Amount Date Particulars Amount

To B’s executer 60,400 By Balance b/d 30,000

A/c
By workmen 64,00
comp fund
By interest on 375
capital
By P/L suspense acc 2,625
By A’s Capital 10,500
By B’s Capital 10,500
60,400 60,400

B’s Executer A/c

Particulars Amount Date Particulars Amount

To Bank A/c 20,400 By B’s Capital 60,400

To Balance c/d 40,000

60,400 60,400