Death of a Partner (part 3) – Digital E-filing Coach

Death of a Partner - Part 3 | WBCHSE Class 12 Accountancy

Introduction to Death of a Partner - Part 3

Death of a Partner is a critical topic in Partnership Accounting that requires understanding of various accounting adjustments and treatments when a partner dies.

Key Concepts Covered in Part 3:

New Profit-Sharing Ratio: Calculation of the remaining partners' profit-sharing ratio after death
Complete Journal Entries: All necessary journal entries from death to final settlement
Balance Sheet After Death: Preparation of Balance Sheet showing the position after partner's death

Disclaimer: This resource is for educational purposes only and does not constitute legal advice.

Topic 1: New Profit-Sharing Ratio

Understanding New Profit-Sharing Ratio

When a partner dies, the remaining partners continue the business and share profits in a new ratio. The new profit-sharing ratio can be calculated in different ways:

When the new ratio is specifically mentioned
When partners acquire the deceased partner's share in a specific ratio
When partners continue in their old ratio (excluding deceased partner)
When one partner acquires the entire share of deceased partner

Problem 1.1 - New Profit-Sharing Ratio (Easy)

Easy

Question:

A, B and C were partners sharing profits in the ratio of 5:3:2. C died. The new profit-sharing ratio between A and B will be 5:3. Calculate the new profit-sharing ratio and gaining ratio.

Problem 1.2 - New Profit-Sharing Ratio (Medium)

Medium

Question:

P, Q and R are partners sharing profits in the ratio of 4:3:2. R died. P and Q decided to share future profits equally. Calculate the new profit-sharing ratio and gaining ratio.

Problem 1.3 - New Profit-Sharing Ratio (Medium)

Medium

Question:

X, Y and Z were partners sharing profits in the ratio of 5:4:1. Z died and his share was acquired by X and Y in the ratio of 2:3. Calculate the new profit-sharing ratio and gaining ratio.

Problem 1.4 - New Profit-Sharing Ratio (Hard)

Hard

Question:

A, B, C and D were partners sharing profits in the ratio of 4:3:2:1. C died. It was agreed that A will acquire 1/2 of C's share and B will acquire the remaining share of C. Calculate the new profit-sharing ratio and gaining ratio.

Solution:

Working Notes:

1. Old Profit-Sharing Ratio:

A : B : C : D = 4 : 3 : 2 : 1

Total = 4 + 3 + 2 + 1 = 10

A's Old Share = 4/10 = 2/5

B's Old Share = 3/10

C's Old Share = 2/10 = 1/5

D's Old Share = 1/10

2. Distribution of C's Share:

C's Share = 1/5

A acquires 1/2 of C's Share = 1/5 × 1/2 = 1/10

B acquires remaining = 1/5 × 1/2 = 1/10

3. New Profit-Sharing Ratio:

A's New Share = 2/5 + 1/10 = (4 + 1)/10 = 5/10 = 1/2

B's New Share = 3/10 + 1/10 = 4/10 = 2/5

D's New Share = 1/10 (Unchanged)

New Ratio = 1/2 : 2/5 : 1/10

Multiply by 10: 5 : 4 : 1

New Ratio = A : B : D = 5 : 4 : 1

4. Gaining Ratio:

A's Gain = 1/2 - 2/5 = (5 - 4)/10 = 1/10

B's Gain = 2/5 - 3/10 = (4 - 3)/10 = 1/10

D's Gain = 1/10 - 1/10 = 0

Gaining Ratio = 1/10 : 1/10 : 0 = 1 : 1 : 0

Since D doesn't gain, Gaining Ratio = A : B = 1 : 1

Verification:

Total of New Shares = 1/2 + 2/5 + 1/10 = (5 + 4 + 1)/10 = 10/10 = 1 ✓

Total Gain (A + B) = 1/10 + 1/10 = 2/10 = 1/5 = C's Share ✓

Answer:

New Profit-Sharing Ratio: A : B : D = 5 : 4 : 1

Gaining Ratio: A : B = 1 : 1

Problem 1.5 - New Profit-Sharing Ratio (Hard)

Hard

Question:

M, N, O and P are partners sharing profits in the ratio of 5:3:3:1. O died. M and N decide to share future profits in the ratio of 3:2, while P will continue with his existing share. Calculate the new profit-sharing ratio and gaining ratio.

Solution:

Working Notes:

1. Old Profit-Sharing Ratio:

M : N : O : P = 5 : 3 : 3 : 1

Total = 5 + 3 + 3 + 1 = 12

M's Old Share = 5/12

N's Old Share = 3/12 = 1/4

O's Old Share = 3/12 = 1/4

P's Old Share = 1/12

2. P's Share Remains Same:

P's New Share = 1/12

Remaining share for M and N = 1 - 1/12 = 11/12

3. M and N Share Remaining in 3:2:

Total ratio of M and N = 3 + 2 = 5

M's New Share = 11/12 × 3/5 = 33/60 = 11/20

N's New Share = 11/12 × 2/5 = 22/60 = 11/30

New Ratio = 11/20 : 11/30 : 1/12

LCM of 20, 30, 12 = 60

= (33/60) : (22/60) : (5/60)

New Ratio = M : N : P = 33 : 22 : 5

4. Gaining Ratio:

M's Gain = 11/20 - 5/12 = (33 - 25)/60 = 8/60 = 2/15

N's Gain = 11/30 - 1/4 = (22 - 15)/60 = 7/60

P's Gain = 1/12 - 1/12 = 0

Gaining Ratio = 2/15 : 7/60 : 0

Multiply by 60: 8 : 7 : 0

Since P doesn't gain, Gaining Ratio = M : N = 8 : 7

Verification:

Total of New Shares = 33/60 + 22/60 + 5/60 = 60/60 = 1 ✓

Total Gain (M + N) = 8/60 + 7/60 = 15/60 = 1/4 = O's Share ✓

Answer:

New Profit-Sharing Ratio: M : N : P = 33 : 22 : 5

Gaining Ratio: M : N = 8 : 7

Problem 1.6 - New Profit-Sharing Ratio (Hard)

Hard

Question:

K, L, M and N are partners sharing profits in the ratio of 6:5:4:3. M died. K acquires 2/3 of M's share, L acquires 1/4 of M's share, and N acquires the remaining share of M. Calculate the new profit-sharing ratio and gaining ratio.

Solution:

Working Notes:

1. Old Profit-Sharing Ratio:

K : L : M : N = 6 : 5 : 4 : 3

Total = 6 + 5 + 4 + 3 = 18

K's Old Share = 6/18 = 1/3

L's Old Share = 5/18

M's Old Share = 4/18 = 2/9

N's Old Share = 3/18 = 1/6

2. Distribution of M's Share:

M's Share = 2/9

K acquires 2/3 of M's Share = 2/9 × 2/3 = 4/27

L acquires 1/4 of M's Share = 2/9 × 1/4 = 2/36 = 1/18

N acquires remaining = 2/9 - 4/27 - 1/18

= (12 - 8 - 3)/54 = 1/54

Verification of Distribution:

Total = 4/27 + 1/18 + 1/54

LCM of 27, 18, 54 = 54

= 8/54 + 3/54 + 1/54 = 12/54 = 2/9 = M's Share ✓

3. New Profit-Sharing Ratio:

K's New Share = 1/3 + 4/27 = (9 + 4)/27 = 13/27

L's New Share = 5/18 + 1/18 = 6/18 = 1/3

N's New Share = 1/6 + 1/54 = (9 + 1)/54 = 10/54 = 5/27

New Ratio = 13/27 : 1/3 : 5/27

LCM of 27, 3 = 27

= 13/27 : 9/27 : 5/27

New Ratio = K : L : N = 13 : 9 : 5

4. Gaining Ratio:

K's Gain = 4/27

L's Gain = 1/18

N's Gain = 1/54

Gaining Ratio = 4/27 : 1/18 : 1/54

Multiply by 54: 8 : 3 : 1

Gaining Ratio = K : L : N = 8 : 3 : 1

Verification:

Total of New Shares = 13/27 + 9/27 + 5/27 = 27/27 = 1 ✓

Total Gain = 8/54 + 3/54 + 1/54 = 12/54 = 2/9 = M's Share ✓

Answer:

New Profit-Sharing Ratio: K : L : N = 13 : 9 : 5

Gaining Ratio: K : L : N = 8 : 3 : 1

Topic 2: Complete Journal Entries

Understanding Complete Journal Entries on Death of a Partner

When a partner dies, several journal entries need to be passed to properly record all transactions. The complete set includes:

Revaluation of Assets and Liabilities
Adjustment for Reserves and Accumulated Profits/Losses
Adjustment for Goodwill
Transfer to Deceased Partner's Capital Account
Settlement to Executor's Account
Payment to Legal Representative

Problem 2.1 - Complete Journal Entries (Easy)

Easy

Question:

A, B and C were partners sharing profits in the ratio of 2:2:1. On 31st March 2024, C died. The books showed the following:

Capital Accounts:	A = ₹60,000; B = ₹50,000; C = ₹40,000
General Reserve:	₹25,000
Goodwill (existing):	₹15,000

Pass the necessary journal entries for:

(a) Distribution of General Reserve

(b) Write-off of existing Goodwill

Solution:

Working Notes:

1. Profit-Sharing Ratio: A:B:C = 2:2:1

Total = 2 + 2 + 1 = 5

2. Distribution of General Reserve:

A's Share = ₹25,000 × 2/5 = ₹10,000

B's Share = ₹25,000 × 2/5 = ₹10,000

C's Share = ₹25,000 × 1/5 = ₹5,000

3. Write-off of Goodwill:

A's Share = ₹15,000 × 2/5 = ₹6,000

B's Share = ₹15,000 × 2/5 = ₹6,000

C's Share = ₹15,000 × 1/5 = ₹3,000

Journal Entries in the Books of the Firm

Date	Particulars	Debit (₹)	Credit (₹)
2024 Mar 31	General Reserve A/c ....Dr.	25,000
	To A's Capital A/c		10,000
	To B's Capital A/c		10,000
	To C's Capital A/c		5,000
(Being General Reserve distributed among partners in profit-sharing ratio)

2024 Mar 31	A's Capital A/c ....Dr.	6,000
	B's Capital A/c ....Dr.	6,000
	C's Capital A/c ....Dr.	3,000
	To Goodwill A/c		15,000
(Being existing Goodwill written off in profit-sharing ratio)

2024 Mar 31	C's Capital A/c ....Dr.	42,000
2024 Mar 31	To C's Executor's A/c		42,000
(Being amount due transferred to C's Executor's Account)

C's Capital Account

Dr.				Cr.
Date	Particulars	Amount (₹)	Date	Particulars	Amount (₹)
2024 Mar 31	To Goodwill A/c	3,000	2024 Mar 31	By Balance b/d	40,000
2024 Mar 31	To C's Executor's A/c	42,000	2024 Mar 31	By General Reserve A/c	5,000
Total		45,000	Total		45,000

Filter by Difficulty:

Introduction to Death of a Partner - Part 3

Key Concepts Covered in Part 3:

Topic 1: New Profit-Sharing Ratio

Understanding New Profit-Sharing Ratio

Problem 1.1 - New Profit-Sharing Ratio (Easy)

Question:

Solution:

Working Notes:

Answer:

Problem 1.2 - New Profit-Sharing Ratio (Medium)

Question:

Solution:

Working Notes:

Verification:

Answer:

Problem 1.3 - New Profit-Sharing Ratio (Medium)

Question:

Solution:

Working Notes:

Verification:

Answer:

Problem 1.4 - New Profit-Sharing Ratio (Hard)

Question:

Solution:

Working Notes:

Verification:

Answer:

Problem 1.5 - New Profit-Sharing Ratio (Hard)

Question:

Solution:

Working Notes:

Verification:

Answer:

Problem 1.6 - New Profit-Sharing Ratio (Hard)

Question:

Solution:

Working Notes:

Verification:

Answer:

Topic 2: Complete Journal Entries

Understanding Complete Journal Entries on Death of a Partner

Problem 2.1 - Complete Journal Entries (Easy)

Question:

Solution:

Working Notes:

Journal Entries in the Books of the Firm

C's Capital Account

Summary:

Flowchart: Death of a Partner Process

Mind Map: Death of a Partner

Learning Roadmap: Death of a Partner