Question

Aaria, Beenu and Clara were partners in a firm sharing profits and losses in the ratio of 4 : 3 : 3. On 30th June, 2023, Clara died. Clara’s share in the profits of the firm till the date of death was to be calculated on the basis of sales. Sales during the year 2022–23 were ₹ 20,00,000, and sales from 1st April, 2023 to 30th June, 2023 were ₹ 4,00,000. The profit for the year ended 31st March, 2023 was ₹ 5,00,000. Calculate Clara’s share of profit up to the date of death and pass the necessary journal entry for the same in the books of the firm. Show your workings clearly.

Hint:

When a partner dies, the share of profit for the period until death is calculated based on the ratio of sales during the period and the total sales.

Answer 1

The profit for the period from April 1, 2023, to June 30, 2023, is computed as follows:Total sales from April 1 to June 30, 2023 = ₹ 4,00,000 Total sales for the year = ₹ 20,00,000Clara's profit share is determined using the sales ratio:\[\text{Clara’s share} = \left( \frac{4,00,000}{20,00,000} \right) \times 5,00,000 = 1,00,000\]Clara's share of profit up to her death date amounts to ₹ 1,00,000.The corresponding journal entry is as follows:\begin{table}[h!]\centering\begin{tabular}{|c|l|c|c|}\hlineDate & Particulars & Dr Amount (₹) & Cr Amount (₹)
\hline30th June 2023 & Clara’s Capital A/c & 1,00,000 &
& To Aaria’s Capital A/c & 33,333 &
& To Beenu’s Capital A/c & 33,333 &
& To Clara’s Capital A/c (Clara’s share of profit) & 33,334 &
\hline\end{tabular}\caption{Journal Entry for Clara’s Share of Profit up to the Date of Death}\end{table}