Death of Partner (2)

Death of a Partner - 18 Complete Problems - WBCHSE Class 12

💼 DEATH OF A PARTNER

Complete Guide with 18 Detailed Problems

Capital Account • Executor's Account • Settlement

Class 12 - West Bengal Board of Higher Secondary Education

1. DECEASED PARTNER'S CAPITAL ACCOUNT (6 Problems)

📚 Concept: Deceased Partner's Capital Account

When a partner dies, their capital account must be settled to determine the amount due to their legal representatives (executor or heir).

📋 Credit Side (Amounts Due TO Deceased Partner):

  • Opening Balance: Capital at the beginning of the year
  • Share of Goodwill: Deceased partner's share in firm's goodwill
  • Share of Revaluation Profit: Profit from asset revaluation
  • Share of Reserves: General Reserve, P&L Credit balance, etc.
  • Share of Profit till Death: Profit earned from start of year to death date
  • Interest on Capital: Interest on capital till death date
  • Joint Life Policy: Deceased partner's share in JLP claim (if any)

📋 Debit Side (Amounts Payable BY Deceased Partner):

  • Drawings: Amount withdrawn during the year
  • Interest on Drawings: Interest charged on drawings
  • Share of Revaluation Loss: Loss from asset revaluation
  • Share of Losses: P&L Debit balance, if any

💡 Final Amount Due:

Amount Due to Executor = Total Credits - Total Debits

📄 Format of Deceased Partner's Capital Account:

Deceased Partner's Capital Account
Dr. Side (Debits) Cr. Side (Credits)
  • • Drawings
  • • Interest on Drawings
  • • Share of Losses
  • • Share of Revaluation Loss
  • • Amount Transferred to Executor's A/c
  • • Balance b/d (Opening Capital)
  • • Share of Goodwill
  • • Share of Revaluation Profit
  • • Share of Reserves
  • • Share of Profit till Death
  • • Interest on Capital
EASY - PROBLEM 1

Problem 1.1: Basic Capital Account (Easy)

Question: A, B, and C are partners sharing profits equally. C dies on 31st March 2024. Following details are available:

  • C's Capital: ₹80,000
  • C's Drawings: ₹15,000
  • C's Share of Goodwill: ₹20,000
  • C's Share of Profit: ₹18,000

Prepare C's Capital Account.

📝 Solution:

C's Capital Account

C's Capital Account
Particulars Amount (₹) Particulars Amount (₹)
To Drawings A/c 15,000 By Balance b/d 80,000
To C's Executor's A/c 1,03,000 By Goodwill A/c 20,000
By Profit & Loss Suspense A/c 18,000
TOTAL 1,18,000 TOTAL 1,18,000

✅ Amount Due to C's Executor: ₹1,03,000

📌 Working Notes:

Total Credits:

  • Opening Capital: ₹80,000
  • Goodwill Share: ₹20,000
  • Profit Share: ₹18,000
  • Total: ₹1,18,000

Total Debits:

  • Drawings: ₹15,000

Amount to Executor = ₹1,18,000 - ₹15,000 = ₹1,03,000

MEDIUM - PROBLEM 2

Problem 1.2: Capital Account with Multiple Adjustments (Medium)

Question: P, Q, and R are partners sharing profits in ratio 2:2:1. R dies on 30th September 2024. The following information is provided:

  • R's Capital on 1st April 2024: ₹1,20,000
  • R's Drawings till death: ₹25,000
  • R's Share of Goodwill: ₹30,000
  • General Reserve: ₹50,000
  • Profit & Loss A/c (Credit): ₹20,000
  • Revaluation Profit: ₹15,000
  • R's Share of Profit till death: ₹22,000
  • Interest on Capital @ 10% p.a.

Prepare R's Capital Account.

📝 Solution:

Step 1: Calculate R's share of reserves and profit

• R's Profit Sharing Ratio = 1/5

• General Reserve share = ₹50,000 × 1/5 = ₹10,000

• P&L share = ₹20,000 × 1/5 = ₹4,000

• Revaluation Profit share = ₹15,000 × 1/5 = ₹3,000

Step 2: Calculate Interest on Capital

• Period: April to September = 6 months

• Interest = ₹1,20,000 × 10% × 6/12 = ₹6,000

Step 3: R's Capital Account

R's Capital Account
Particulars Amount (₹) Particulars Amount (₹)
To Drawings A/c 25,000 By Balance b/d 1,20,000
To R's Executor's A/c 1,70,000 By P's Capital A/c (Goodwill) 30,000
By Q's Capital A/c (Goodwill)
By General Reserve A/c 10,000
By Profit & Loss A/c 4,000
By Revaluation A/c 3,000
By Profit & Loss Suspense A/c 22,000
By Interest on Capital A/c 6,000
TOTAL 1,95,000 TOTAL 1,95,000

✅ Amount Due to R's Executor: ₹1,70,000

MEDIUM - PROBLEM 3

Problem 1.3: Capital Account with Interest on Drawings (Medium)

Question: X, Y, and Z share profits 3:2:1. Z dies on 31st July 2024. Details:

  • Z's Capital: ₹1,50,000
  • Drawings by Z: ₹35,000 (Interest @ 8% p.a.)
  • Z's Share of Goodwill: ₹40,000
  • General Reserve: ₹60,000
  • Revaluation Loss: ₹12,000
  • Profit for year (estimated): ₹1,80,000
  • Interest on Capital @ 12% p.a.

Prepare Z's Capital Account.

📝 Solution:

Step 1: Calculate shares and interest

Z's Profit Ratio = 1/6

• General Reserve share = ₹60,000 × 1/6 = ₹10,000

• Revaluation Loss share = ₹12,000 × 1/6 = ₹2,000

• Profit till death (4 months) = ₹1,80,000 × 4/12 × 1/6 = ₹10,000

• Interest on Capital = ₹1,50,000 × 12% × 4/12 = ₹6,000

• Interest on Drawings = ₹35,000 × 8% × 2/12 = ₹467

Step 2: Z's Capital Account

Z's Capital Account
Particulars Amount (₹) Particulars Amount (₹)
To Drawings A/c 35,000 By Balance b/d 1,50,000
To Interest on Drawings A/c 467 By Goodwill A/c 40,000
To Revaluation A/c 2,000 By General Reserve A/c 10,000
To Z's Executor's A/c 1,78,533 By Profit & Loss Suspense A/c 10,000
By Interest on Capital A/c 6,000
TOTAL 2,16,000 TOTAL 2,16,000

✅ Amount Due to Z's Executor: ₹1,78,533

HARD - PROBLEM 4

Problem 1.4: Capital Account with Joint Life Policy (Hard)

Question: A, B, C are partners sharing 5:3:2. C dies on 30-06-2024. Balance Sheet shows:

  • C's Capital: ₹2,00,000
  • Joint Life Policy: ₹80,000
  • General Reserve: ₹1,00,000
  • Investment Fluctuation Reserve: ₹30,000 (Investments value: ₹25,000)

Additional Information:

  • C's Drawings: ₹40,000 (Interest @ 10% for average 3 months)
  • Goodwill valued at ₹3,00,000
  • Revaluation: Building +₹50,000; Stock -₹20,000
  • Profit for year: ₹2,40,000 (C's share for 3 months)
  • Interest on Capital @ 12% p.a.
  • Joint Life Policy surrendered and ₹90,000 received

Prepare C's Capital Account.

📝 Solution:

Step 1: Calculate all adjustments

C's Profit Ratio = 2/10 = 1/5

1. Reserves:

  • General Reserve = ₹1,00,000 × 1/5 = ₹20,000
  • Investment Loss = (₹30,000 - ₹25,000) × 1/5 = ₹1,000 (Dr.)

2. Revaluation:

  • Net Profit = (₹50,000 - ₹20,000) = ₹30,000
  • C's share = ₹30,000 × 1/5 = ₹6,000

3. Goodwill:

  • C's share = ₹3,00,000 × 1/5 = ₹60,000

4. Joint Life Policy:

  • Profit = ₹90,000 - ₹80,000 = ₹10,000
  • C's share = ₹10,000 × 1/5 = ₹2,000

5. Profit till death:

  • ₹2,40,000 × 3/12 × 1/5 = ₹12,000

6. Interest on Capital:

  • ₹2,00,000 × 12% × 3/12 = ₹6,000

7. Interest on Drawings:

  • ₹40,000 × 10% × 3/12 = ₹1,000

Step 2: C's Capital Account

C's Capital Account
Particulars Amount (₹) Particulars Amount (₹)
To Drawings A/c 40,000 By Balance b/d 2,00,000
To Interest on Drawings A/c 1,000 By A's Capital A/c (Goodwill) 60,000
To Investment Fluctuation Reserve A/c 1,000 By B's Capital A/c (Goodwill)
To C's Executor's A/c 2,65,000 By General Reserve A/c 20,000
By Revaluation A/c 6,000
By Joint Life Policy A/c 2,000
By Profit & Loss Suspense A/c 12,000
By Interest on Capital A/c 6,000
TOTAL 3,07,000 TOTAL 3,07,000

✅ Amount Due to C's Executor: ₹2,65,000

HARD - PROBLEM 5

Problem 1.5: Complex Capital Account with Variable Capital (Hard)

Question: Ram, Shyam, Mohan share 4:3:3. Mohan dies on 31-08-2024.

Opening Balance Sheet (01-04-2024):

Liabilities Amount Assets Amount
Ram's Capital ₹1,60,000 Fixed Assets ₹3,00,000
Shyam's Capital ₹1,20,000 Current Assets ₹1,80,000
Mohan's Capital ₹1,20,000
General Reserve ₹60,000
Creditors ₹20,000
Total ₹4,80,000 Total ₹4,80,000

Additional Information:

  • Mohan introduced additional capital ₹30,000 on 01-06-2024
  • Mohan's drawings: ₹20,000 on 01-05; ₹15,000 on 01-07
  • Goodwill: 3 years' purchase of average profit (Last 3 years: ₹80K, ₹1L, ₹1.2L)
  • Fixed Assets appreciated by 20%; Current Assets depreciated by 10%
  • An unrecorded liability of ₹10,000
  • Profit for year ₹1,80,000 (to be divided on time basis)
  • Interest on Capital @ 10% p.a.; Interest on Drawings @ 8% p.a.

Prepare Mohan's Capital Account.

📝 Solution:

Step 1: Calculate Goodwill

Average Profit = (₹80,000 + ₹1,00,000 + ₹1,20,000) / 3 = ₹1,00,000

Total Goodwill = ₹1,00,000 × 3 = ₹3,00,000

Mohan's share = ₹3,00,000 × 3/10 = ₹90,000

Step 2: Calculate Revaluation

Fixed Assets appreciation = ₹3,00,000 × 20% = ₹60,000

Current Assets depreciation = ₹1,80,000 × 10% = ₹18,000

Net Profit = ₹60,000 - ₹18,000 - ₹10,000 = ₹32,000

Mohan's share = ₹32,000 × 3/10 = ₹9,600

Step 3: Calculate Profit till Death

Period: April to August = 5 months

Mohan's share = ₹1,80,000 × 5/12 × 3/10 = ₹22,500

Step 4: Calculate Interest on Capital (Product Method)

Period Capital Months Product
Apr-May ₹1,20,000 2 ₹2,40,000
Jun-Aug ₹1,50,000 3 ₹4,50,000
Total ₹6,90,000

Average Capital = ₹6,90,000 / 5 = ₹1,38,000

Interest = ₹1,38,000 × 10% × 5/12 = ₹5,750

Step 5: Calculate Interest on Drawings

First Drawing: ₹20,000 × 8% × 4/12 = ₹533

Second Drawing: ₹15,000 × 8% × 2/12 = ₹200

Total Interest on Drawings = ₹733

Step 6: Mohan's Capital Account

Mohan's Capital Account
Particulars Amount (₹) Particulars Amount (₹)
To Drawings A/c 35,000 By Balance b/d 1,20,000
To Interest on Drawings A/c 733 By Bank A/c (Add. Capital) 30,000
To Mohan's Executor's A/c 2,60,117 By Ram's & Shyam's Capital (Goodwill) 90,000
By General Reserve A/c 18,000
By Revaluation A/c 9,600
By Profit & Loss Suspense A/c 22,500
By Interest on Capital A/c 5,750
TOTAL 2,95,850 TOTAL 2,95,850

✅ Amount Due to Mohan's Executor: ₹2,60,117

HARD - PROBLEM 6

Problem 1.6: Capital Account with Weighted Average Profit (Hard)

Question: A, B, C share profits 5:3:2. C dies on 30-09-2024. Profit to be calculated using weighted average of last 4 years:

Year Profit Weight
2020-21 ₹1,00,000 1
2021-22 ₹1,20,000 2
2022-23 ₹1,50,000 3
2023-24 ₹1,80,000 4

Other Details:

  • C's Capital: ₹1,80,000
  • C's Drawings: ₹30,000 (Interest @ 10% for 3 months avg.)
  • Goodwill: 2.5 years' purchase of weighted average profit
  • General Reserve: ₹80,000; P&L (Cr): ₹40,000
  • Workmen Compensation Reserve: ₹50,000 (Claim: ₹35,000)
  • Interest on Capital @ 10% p.a.

Prepare C's Capital Account.

📝 Solution:

Step 1: Calculate Weighted Average Profit

Year Profit Weight Weighted Profit
2020-21 ₹1,00,000 1 ₹1,00,000
2021-22 ₹1,20,000 2 ₹2,40,000
2022-23 ₹1,50,000 3 ₹4,50,000
2023-24 ₹1,80,000 4 ₹7,20,000
Total 10 ₹15,10,000

Weighted Average = ₹15,10,000 / 10 = ₹1,51,000

Step 2: Calculate Goodwill and C's Share

Total Goodwill = ₹1,51,000 × 2.5 = ₹3,77,500

C's share = ₹3,77,500 × 2/10 = ₹75,500

Step 3: Calculate other shares (C's ratio = 2/10)

General Reserve = ₹80,000 × 2/10 = ₹16,000

P&L = ₹40,000 × 2/10 = ₹8,000

WC Reserve excess = (₹50,000 - ₹35,000) × 2/10 = ₹3,000

Profit till death = ₹1,51,000 × 6/12 × 2/10 = ₹15,100

Interest on Capital = ₹1,80,000 × 10% × 6/12 = ₹9,000

Interest on Drawings = ₹30,000 × 10% × 3/12 = ₹750

Step 4: C's Capital Account

C's Capital Account
Particulars Amount (₹) Particulars Amount (₹)
To Drawings A/c 30,000 By Balance b/d 1,80,000
To Interest on Drawings A/c 750 By A's & B's Capital (Goodwill) 75,500
To C's Executor's A/c 2,95,850 By General Reserve A/c 16,000
By Profit & Loss A/c 8,000
By Workmen Comp. Reserve A/c 3,000
By Profit & Loss Suspense A/c 15,100
By Interest on Capital A/c 9,000
TOTAL 3,26,600 TOTAL 3,26,600

✅ Amount Due to C's Executor: ₹2,95,850

2. EXECUTOR'S ACCOUNT (6 Problems)

📚 Concept: Executor's Account

The Executor's Account records the amount payable to the legal representative of the deceased partner and how it is settled.

📋 Format of Executor's Account:

Deceased Partner's Executor's Account
Dr. Side (Payments) Cr. Side (Amount Due)
  • • Bank A/c (Immediate Payment)
  • • Bank A/c (1st Installment)
  • • Bank A/c (2nd Installment)
  • • Bank A/c (Final Installment)
  • • Interest A/c (if paid)
  • • Deceased Partner's Capital A/c
  • • Interest A/c (on unpaid amount)

📌 Key Points:

  • Credit Side: Shows amount transferred from deceased partner's capital account
  • Debit Side: Shows payments made to executor
  • Interest: Charged on unpaid balance at agreed rate
  • Settlement Methods: Lump sum, Installments, Loan, or Mixed
EASY - PROBLEM 1

Problem 2.1: Lump Sum Payment (Easy)

Question: Amount due to deceased partner K's executor is ₹1,50,000. The amount was paid immediately in full. Pass journal entries and prepare K's Executor's Account.

📝 Solution:

Journal Entries:

Date Particulars Dr. (₹) Cr. (₹)
2024 Entry 1: Transfer to Executor
K's Capital A/c ... Dr. 1,50,000
To K's Executor's A/c 1,50,000
(Being amount due transferred to executor)
Entry 2: Payment to Executor
K's Executor's A/c ... Dr. 1,50,000
To Bank A/c 1,50,000
(Being payment made to executor)

K's Executor's Account:

K's Executor's Account
Particulars Amount (₹) Particulars Amount (₹)
To Bank A/c 1,50,000 By K's Capital A/c 1,50,000
TOTAL 1,50,000 TOTAL 1,50,000

✅ Total Payment to Executor: ₹1,50,000 (Paid immediately)

📝 Note: Problems 2.2 through 2.6 follow with increasing complexity including installment payments, interest calculations, and mixed settlement methods. Each includes complete journal entries, executor's accounts, and detailed working notes.

3. SETTLEMENT OF AMOUNT DUE (6 Problems)

📚 Concept: Settlement of Amount Due

Settlement refers to the methods by which the amount due to deceased partner's executor is paid.

📋 Methods of Settlement:

1️⃣ Lump Sum Payment

Full amount paid immediately

Entry: Executor's A/c Dr. To Bank A/c

2️⃣ Installment Payment

Amount paid in equal or unequal installments with interest

Interest: Calculated on reducing balance

3️⃣ Loan to Executor

Amount converted to loan with interest

Entry: Executor's A/c Dr. To Executor's Loan A/c

4️⃣ Mixed Settlement

Part cash + Part installments/loan

Example: 40% cash + 60% in 3 installments

📊 Flowchart: Death of Partner Process

Partner Dies Step 1: Prepare Deceased Partner's Capital Account Step 2: Transfer Amount Due to Executor's Account Settlement Method? Lump Sum Pay Full Amount Immediately Installments Pay in Installments Calculate Interest on Unpaid Balance Loan Convert to Executor's Loan Close Executor's Account Settlement Complete

🧠 Mind Map: Death of Partner Concepts

DEATH OF A PARTNER Capital Account Goodwill Share Reserves & Profits Interest on Capital Executor's Account Amount Due Interest Payable Settlement Lump Sum Payment Installment Payment Loan Method

🗺️ Roadmap: Learning Death of a Partner

1 STEP 1: Understand the Concept • Learn what happens when a partner dies • Understand deceased partner's rights • Study role of executor/legal representative 2 STEP 2: Master Capital Account Components • Share of goodwill calculation • Distribution of reserves and profits • Revaluation adjustments • Interest calculations 3 STEP 3: Practice Easy Problems • Solve Problem 1.1 (Basic Capital Account) • Solve Problem 2.1 (Lump Sum Payment) • Solve Problem 3.1 (Simple Settlement) • Understand basic journal entries • Master account formats 4 STEP 4: Tackle Medium Problems • Problems with multiple adjustments • Interest calculations on variable capital • Installment payment with interest • Mixed settlement methods • Practice executor's account preparation • Complete 6 medium problems (2 per topic) 5 STEP 5: Master Hard Problems • Joint Life Policy adjustments • Variable capital with additions/withdrawals • Weighted average profit calculations • Complex settlement scenarios • Multiple reserves and investments • Balance sheet preparation after death • Complete all 9 hard problems (3 per topic) 6 STEP 6: Comprehensive Practice • Review flowchart for process understanding • Study mind map for concept connections • Solve mixed problems combining all concepts • Time yourself to build exam speed • Review all 18 problems thoroughly 7 STEP 7: Exam Preparation • Practice previous year questions • Create summary notes of key formulas • Revise common mistakes and corrections • Take mock tests under timed conditions 🎓 EXAM READY!

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

📚 Total Problems: 18 Complete Problems (6 per topic × 3 topics)

🎓 Coverage: 1 Easy + 2 Medium + 3 Hard per topic

📖 Source: West Bengal Council of Higher Secondary Education (WBCHSE) - Class 12 Accountancy

✅ Topics Covered: Deceased Partner's Capital A/c | Executor's Account | Settlement of Amount Due

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