The preparation of Shirish's Capital Account to be presented to his executor is as follows:
Shirish
<h3>Capital Account</h3>
Date Transaction Debit Credit
31st March Beginning balance 100,000
30th June Share of profits for Shirish 35,000
Share of Goodwill 70,000
30th June Ending balance 205,000
<h3>Data and Calculations:</h3>
Profit sharing ratio of Shirish, Harit and Asha = 5:4:1
i) Profit for the year 2016-17 was 60,000
Profit for 2017-18 = 80,000
Average profit = 70,000 (140,000/2)
Share of profits for Shirish = 35,000 (70,000 x 5/10)
(ii) Goodwill at 2 years' purchase of average of last two years' profits = 140,000 (70,000 x 2)
Share of Goodwill = 70,000 (140,000 x 5/10)
Thus, the capital account shows that the executor of Shirish will be getting <u>205,000</u> from the former partnership.
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