Question

Ram, Manohar and Joshi were partners in a firm. Joshi died on 28th February, 2018. His share of profit from the closure of the last accounting year till the date of death was to be calculated on the basis of the average of three completed years of profits before death. Profits for 2015, 2016 and 2017 were Rs. 8,000, Rs. 9,000, and Rs. 10,000 respectively. Firm follows calendar year as accounting year. Calculate Joshi’s share of profit till his death.

• A. Rs. 500/-
• B. Rs. 3000/-
• C. Rs. 4500/-
• D. Rs. 2,750/-

Hint:

In the absence of a partnership deed or specified ratio, always assume partners share profits and losses equally. Also, ensure you calculate the time period correctly based on the firm's accounting year (Calendar vs. Financial).

Answer 1

The Correct Option is A

Concept: When a partner dies during an accounting year, their share of profit for the period they were alive (from the start of the year to the date of death) must be calculated. This is often done on a Time Basis using the average profit of previous years.

Step 1: Calculate the Average Profit.
the profits for the three completed years are Rs. 8,000, Rs. 9,000, and Rs. 10,000. \[ \text{Average Profit} = \frac{8,000 + 9,000 + 10,000}{3} = \frac{27,000}{3} = \text{Rs. 9,000} \]

Step 2: Calculate the Estimated Profit for the period before death.
The firm follows a calendar year (January to December). Joshi died on 28th February, meaning he worked for 2 months (January and February) in 2018. \[ \text{Profit for 2 months} = \text{Average Profit} \times \frac{2}{12} \] \[ \text{Profit for 2 months} = 9,000 \times \frac{1}{6} = \text{Rs. 1,500} \]

Step 3: Calculate Joshi's Share of Profit.
Since no specific profit-sharing ratio is mentioned for Ram, Manohar, and Joshi, they are assumed to be equal partners ($1:1:1$). \[ \text{Joshi's Share} = 1,500 \times \frac{1}{3} = \text{Rs. 500} \]