Professional Documents
Culture Documents
Death of a partner
The amount payable to the deceased partner is ascertained by considering his capital account balance, Interest on capital, salary, commission etctill the date of death Drawings Interest on drawings Share in profit or loss on revaluation of assets and liabilities Undistributed profit or loss, profit up to the date of death Joint life policy or individual policies Goodwill of the firm
Goodwill
It is the compensation, or the premium payable to the deceased partner by the continuing partners. The methods of treating goodwill are:
Goodwill A/c Dr To all partners capital Ac (old profit ratio) Note: Goodwill appears as an asset in the balance sheet of the new firm.
Goodwill
Goodwill is raised to its full value and is written off by the continuing partners: For raising goodwill: Goodwill A/c Dr To all partners capital A/c (old profit ratio)
For writing off goodwill: Continuing partners capital account Dr (New profit ratio) To Goodwill A/c
Goodwill
Goodwill is raised only to the extent of deceased partner and allowed to remain in the books of the new firm.
Goodwill A/c Dr To deceased partners capital A/c Note: Goodwill shall appear as an asset in the balance sheet of the continuing partners.
Goodwill
Goodwill is raised only to the extent of deceased partner but is written off by the continuing partners:
For raising goodwill: Goodwill A/c Dr To deceased partners capital A/c For writing off goodwill: Continuing partners capital account (gain ratio) To Goodwill A/c Dr
Goodwill
No goodwill is raised, but goodwill amount is adjusted directly into the capital accounts:
Continuing partners capital account Dr (gain ratio) To Deceased Partners capital A/c
Goodwill
i)
Where goodwill already appears at a lower value than its real value: Goodwill A/c (net increase on revaluation) Dr To all partners capital Ac (old profit ratio)
Where goodwill already appears at a higher value than its real value: All partners capital A/c Dr To Goodwill A/c
ii)
Interest on capital, salary, remuneration, Dr commission A/c To deceased partners capital A/c
Drawings
Deceased partners capital A/c To Deceased partners drawings A/c Dr
Interest on Drawings
Deceased partners capital A/c To Interest on drawings A/c Dr
Adjustments
Profit upto the date of death Profit and loss suspense A/c Dr To Partners capital A/c (with the share of the deceased partners profit) Deceased partners Capital A/c Dr To Executors/ Legal representatives A/c Executors/ Legal representatives A/c Dr To cash/Bank A/c