For example, A, B and C are in a partnership business-sharing profits and losses equally. C retires on 31st October, 2005. The capitals of the partners, after all necessary adjustments stood at Rs. 50,000, Rs. 75,000 and Rs. 1,20,000 respectively. A and B continued to carry on the business further without settling the accounts of C. Final payment to C is made on February 1, 2006. The profit made during the period of three months amounts to Rs. 28,000. Under Section 37 of the Partnership Act, C can exercise any of the following two options. (0) Share in subsequent profits of firm: Profit made-Rs. 28,000 1,20,000 C's share - 28,000 = Rs. 13,714 2,45,000 (ii) Interest at 6% p.a. 6 3 1,20,000 x = Rs. 1,800 100 12 Since, () option is beneficial for C, he will necessarily go for his proportionate share in profits. X 165 Illustration 10 Rohan, Sohan and Mohan were partners sharing profits and losses in the ratio of 2:2:1. Their Balance Sheet as on 1-1-2006 stood as follows: Liabilities Rs. Rs. Assets Rs Capital Accounts Fixed Assets 1,00,000 Rohan 50,000 Stock 25,000 Sohan 40,000 Debtors 35,000 Mohan 30,000 1,20,000 Cash and bank 10,000 Reserves 10,000 Cre 40.000 1.70,000 1.70,000 The firm had taken a Joint Life Policy for Rs. 1 lac, the premium amounts on which were charged to the Profit and Loss Account. On 1st July, 2006 Mohan died. His representatives agreed that: (1) Goodwill of the firm be valued at Rs. 50,000; (11) Fixed Assets be written down by Rs. 10,000; and (1) In lieu of profits, Mohan should be paid at the rate of 25% per annum on his capital as on 1-1-2006 The policy money was received on 31-12-2006 and Mohan's heirs were paid the total amount due on the same day. Current years (2006) profit after charging depreciation of Rs. 9,500 (Rs. 5,000 related to the 1st half) was Rs. 40,500. The year-end figures of Stock, Debtors and Creditors and Cash and Bank Balances were respectively Rs. 33,000, 29,000, 35,000 and 66,217. The particulars regarding their drawings are given below: For example, A, B and C are in a partnership business-sharing profits and losses equally. C retires on 31st October, 2005. The capitals of the partners, after all necessary adjustments stood at Rs. 50,000, Rs. 75,000 and Rs. 1,20,000 respectively. A and B continued to carry on the business further without settling the accounts of C. Final payment to C is made on February 1, 2006. The profit made during the period of three months amounts to Rs. 28,000. Under Section 37 of the Partnership Act, C can exercise any of the following two options. (0) Share in subsequent profits of firm: Profit made-Rs. 28,000 1,20,000 C's share - 28,000 = Rs. 13,714 2,45,000 (ii) Interest at 6% p.a. 6 3 1,20,000 x = Rs. 1,800 100 12 Since, () option is beneficial for C, he will necessarily go for his proportionate share in profits. X 165 Illustration 10 Rohan, Sohan and Mohan were partners sharing profits and losses in the ratio of 2:2:1. Their Balance Sheet as on 1-1-2006 stood as follows: Liabilities Rs. Rs. Assets Rs Capital Accounts Fixed Assets 1,00,000 Rohan 50,000 Stock 25,000 Sohan 40,000 Debtors 35,000 Mohan 30,000 1,20,000 Cash and bank 10,000 Reserves 10,000 Cre 40.000 1.70,000 1.70,000 The firm had taken a Joint Life Policy for Rs. 1 lac, the premium amounts on which were charged to the Profit and Loss Account. On 1st July, 2006 Mohan died. His representatives agreed that: (1) Goodwill of the firm be valued at Rs. 50,000; (11) Fixed Assets be written down by Rs. 10,000; and (1) In lieu of profits, Mohan should be paid at the rate of 25% per annum on his capital as on 1-1-2006 The policy money was received on 31-12-2006 and Mohan's heirs were paid the total amount due on the same day. Current years (2006) profit after charging depreciation of Rs. 9,500 (Rs. 5,000 related to the 1st half) was Rs. 40,500. The year-end figures of Stock, Debtors and Creditors and Cash and Bank Balances were respectively Rs. 33,000, 29,000, 35,000 and 66,217. The particulars regarding their drawings are given below