Kavita, Naman and Mansi were partners in a firm sharing profits andlosses in the ratio of 5 : 3 : 2. On 30th September 2023, Kavita died. Thepartnership deed provided that on the date of death, her share of profit tillthe date of death was to be calculated on the basis of average profits of lastyear less ` 20,000.Profits for last 3 years were:Year Ended Profit / Loss (`)31st March 2021 1,40,00031st March 2022 (60,000)31st March 2023 1,60,000Kavita’s share of profit till date of her death was:(a) ` 15,000 (b) ` 20,000(c) ` 40,000 (d) ` 25,000
Question
Kavita, Naman and Mansi were partners in a firm sharing profits andlosses in the ratio of 5 : 3 : 2. On 30th September 2023, Kavita died. Thepartnership deed provided that on the date of death, her share of profit tillthe date of death was to be calculated on the basis of average profits of lastyear less 20,000.Profits for last 3 years were:Year Ended Profit / Loss ()31st March 2021 1,40,00031st March 2022 (60,000)31st March 2023 1,60,000Kavita’s share of profit till date of her death was:(a) 15,000 (b) 20,000(c) 40,000 (d) 25,000
Solution
First, we need to calculate the average profit for the last three years:
Profit for year ended 31st March 2021 = 1,40,000 Loss for year ended 31st March 2022 = (60,000) Profit for year ended 31st March 2023 = 1,60,000
Total profit for the last three years = 1,40,000 - 60,000 + 1,60,000 = 2,40,000
Average profit for the last three years = Total profit / Number of years = 2,40,000 / 3 = 80,000
According to the partnership deed, on the date of Kavita's death, her share of profit is to be calculated on the basis of average profits of last year less ` 20,000.
So, Kavita's share of profit = Average profit - 20,000 = 80,000 - 20,000 = 60,000
But this is the total profit. Kavita's share in the partnership is 5 out of a total of 5+3+2 = 10 parts.
So, Kavita's share of the profit till the date of her death = (5/10) * 60,000 = ` 30,000
Therefore, none of the options (a), (b), (c), or (d) is correct. The correct answer is ` 30,000.
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