Question : A, B and S were partners sharing profits in the ratio 2: 2: 1. On July 1, 2017, Shreya died. The books of accounts are closed on March 31 every year. Sales for the year 2016-17 amounted to Rs.5,00,000 and that from 1st April to 30th June 2017 were Rs. 1,40,000. The rate of profit during the past three years had been 10% on sales. Since S's legal representative was her only son, who is specially abled, it was decided that the profit for the purpose of settling S's account is to be calculated as 20% of sales.
Calculate S's share of profits till the date of her death and pass the necessary journal entry for the same.
Option 1: Debited profit and loss account by Rs 5,600 and credited S's capital account
Option 2: Debited profit and loss suspense account by Rs 5,600 and credited S's account
Option 3: Debited S's capital account and credited profit and loss suspense account
Option 4: None of the above
Correct Answer: Debited profit and loss suspense account by Rs 5,600 and credited S's account
Solution :
Answer =
Debited profit and loss suspense account by Rs 5600 and credited S's account
Sales (IApril to Dure 30,2017)=1,40,000
Profit= $1,40,000 \times \frac{20}{100}$= 28,000.
Shreys's share= $28000 \times \frac{1}{5}$= 5,600
Protit and cass suspense AlC or 5600
To Shreya's Capital AIC - 5600
Hence, the correct option is 2.
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