DEPARTMENT OF TECHNICAL

EDUCATION ANDHRA PRADESH

Name : J.SATYANARAYANA RAO
Designation : Sr.Lecturer
Branch : Commercial & Computer Practice
Institute : Govt polytechnic for Women Guntur
Year/Semester : IV Semester
Subject : Accountancy –III
Subject Code : CCP-402
Topic : Partnership
Duration : 50 minutes
Sub Topic : Executor of Deceased partner
Teaching Aids : PPT Animation
CCP402.58 1
Objectives

On completion of this period, you would be

able to
 Understand the accounts of partnership in case
of a partner’s death

CCP402.58 2
The following amounts will be paid to the
Executor, consequent on death of a partner:

 Capital Account of the deceased partner as per the

last Balance Sheet of the firm
 Interest on capital, if any, to the date of death of the
partner
 Share in the goodwill of the firm
 Share in the revaluation of assets and liabilities

CCP402.58 3
 Share in the accumulated reserves
 Share in the undistributed profits
 Share in the profit of the firm from the last
Balance Sheet to the date of his death
 Share in the Joint Life Policy
 Salary, if any due to him till the date of his death

CCP402.58 4
Example 1:
A, B and c are partners sharing profits and
losses in the Proportion of 3:2:1 and their Balance
Sheet on 31st Dec, 1985 Was as follows:
Liabilities Rs. Assets Rs.

Bills payable 7,560 Cash in hand 250

Creditors 12,300 Cash at Bank 960
General Reserve 3,000 Bills receivable 3,300
Capital accounts Debtors 7,450
A 10,000 Stock 12,470
B 6,000 Investments 10430
C 4,000 20,000 Buildings 8,000

42,860 42,860
CCP402.58 5
B died on 28th Feb, 1986 and according to
partnership Agreement his legal representative is
entitled to be paid out as Follows:
 The capital to his credit at the time of his death
and interest up to the time of his death at 6% per
annum
 His appropriate share of general reserve

CCP402.58 6
 His share of profit for the period base d on the
figure of the profit of the previous year
 Goodwill according to his share of profits to be
calculate by taking twice the amount of the
average profits of the last three years were 1983
Rs. 7,800 1984 Rs. 9,000 and 1985 of Rs. 9,600
 The investments and Bills receivable were
realized and B’s legal representative was paid
off. Pass the necessary Journal entries and
write the account of B

CCP402.58 7
Journal

Rs Rs
Interest a/c Dr. 60-00
To B’s Capital a/c 60-00
(Being the interest at 6% for
2 months credited to B’s capital
account)
General Reserve a/c Dr. 1,000-00
To B’s Capital a/c 1,000-00
(Being the B’s share of General
Reserve credit to his capital
account)

CCP402.58 8
Profit & loss a/c Dr 533-33
To B’s capital a/c 533-33
(Being the profit due to B
up to 28th Feb,1984)

Goodwill a/c Dr
To B’s capital a/c 5,866-67
(Being B’s share of 5,866-67
Goodwill credited)

CCP402.58 9
Bank a/c 13,730-00
Dr 10,430-00
To Investments a/c 3,300-00
To Bills Receivable a/c
(Being the sale proceeds
of Investments and Bills)
13,460-00
B’s Capital a/c 13,460-00
Dr
To Bank a/c
(Being the payment of
amount due To B’s
executors)
CCP402.58 10
B’s capital A/c

Rs p Rs p
To Bank 13,460-00 By balance b/d 6,000-00
By Interest 60-00
By General Reserve 1,000-00
By Profit & Loss a/c
(profit) 533-33
By Goodwill 5,866-67
13,460-00 13,46-00

CCP402.58 11
Working Notes:
 Calculation of Interest:
Interest on Rs. 6,000 at 6% for 2 months (from
1-1-86 to 28-2-1963)
6000 x 6/100 x 2/12=Rs. 60
 Calculation of Profit:
Profit for the year 1985 = 9,600
Profit for 2 months = 9,600 x 2/12
B’s share of Profit = 9,600 x 2/12 x 2/6
= Rs. 533.33 p.

CCP402.58 12
 Calculation of Goodwill:
Total profits for 3 years = 7,800 + 9,000 + 9,600
= 26,400
Average Profit = 26,400/3
= Rs. 8,800
 Goodwill being 2 years purchase of Average profits
Of the last Three years = 8800 x 2 = 17,600
B’s share of Goodwill = 17,600 x 2/6
= Rs. 5,866-67 p

CCP402.58 13
Summary

 The account treatment to Retirement and Death of

Partner one and the same

 Balance the capital the beginning of the year in
which the Death takes place
 Interest on capital and the salary due to deceased
partner is credited to his capital account
 Share of Goodwill to the Deceased partner must
be calculated as per the agreement

CCP402.58 14
 Proportionate share in general reserve or
undistributed profits must be credited to his
Capital Account
 The amount received in respect of insurance
policy taken by the firm should be credited to the
capital accounts of all the partners in their profit
sharing ratio

CCP402.58 15
 The capital account of the deceased partner
must be debited the amount of drawing and
interest
 The capital due to the deceased partner up to the
date of his death is calculated and then placed to
the credit of a separate account opened called
Loan A/c in the name of
his executor

CCP402.58 16
Quiz
1) Why an executor is appointed on behalf of a death
partner
(a) He knows all the rules about the partnership
Business
(a) To receive and pay all the due amounts to the
death of a partner
(c) To receive and utilize to his personal expenses

(a) All of the above

CCP402.58 17
Assignment
1. A,B and C are partners sharing profits and losses in the
proportion of 3:2:1 and their Balance sheet on 31st
December, 2005 was as follows:
Liabilities Rs. Assets Rs.

Bills Payable 7,560 Cash in Hand 250

Creditors 12,300 Cash at bank 960
Reserve 3,000 Bills receivable 3,300
Capital A/c’s Debtors 7,450
A 10,000 Stock 12,470
B 6,000 Investments 10,430
C 4,000
__________ Buildings 8,000
20,000
__________ __________
42,860 42,860
CCP402.58 18
B died on 28th Feb. 2006 and according to
partnership agreement his legal representative is
entitled to be paid out as follows;
 The capital to his credit at the time of his death
and interest up to the time of his death at 6% p.A
 His appropriate share of reserve
 His share of profit for the period based on the
figure profit of the previous year

CCP402.58 19
 Goodwill according to the share of profit to be
calculated taking twice the amount of the
average profit of the last three years were 2003
Rs. 7,800. 2004 Rs. 9.000. 2005 of Rs. 9,600
 The investment and B/R were realized and B’s
legal representative was paid off
 Pass the necessary journal entries and write the
account of B

CCP402.58 20