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garner vs murray

itika mehra (articled assistant) (202 Points)

01 October 2009

In partnership accounts we have a case of garner vs murray

Acc. to dat case law the the partner who is in deafault his loss wud b beared by remaining partners in the ratio of their last agreed capital .

But in compilation there a two que. numbered as 3 n 6 in vch dis rule is to b followed. Solution to both the que. is different.

In 3rd que. they are takin capitl ratio of opening one n while in 6th que. they r taking last agreed capital ratio.

Can anybody suggest me the reason for dat?

Thanx in advance....

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3 Replies

The Harshit Aggarwal (B.Com(H) ,CS Final) (5278 Points)
Replied 02 October 2009

hiii, i did that last year and right now i have no questions on that and without questions i can't tell u the exect answer but,

there are several reasons 4 that:

1. the opening capital ratio and agreed capital ratio may be the same or come out to be same.

2. the other solvent partners exept one may have defficiency in their capital a/c.

3. there may be no such an item which influence the ratio.

4. and the important one is if all of the abouve situations are not relevent than the solution may be wrong in the book, last year in my book also there were a lot of mistakes.

So don't get confused "USE LAST AGREED RATIO"

Take Care !

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CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 03 October 2009

DECISION GIVEN IN CASE OF GARNER V/S MURRAY.

Ü If there is loss on realization, the remaining Solvent Partners must contribute in cash their share of realization loss, irrespective of their capital balance.

Ü Deficiency arising out of insolvency of a partner shall be borne by the remaining partners in the ratio of capital as it stood on the date of dissolution. For this purpose,

§ When partners are following FIXED CAPITAL SYSTEM, balance of capital a/c only will be considered and balance of current a/c, reserves and accumulated losses will be ignored.

§ When partners are following FLUCTUATING CAPITAL SYSTEM, ratio of capital will b calculated after considering accumulated Profits & Losses.

(For the above purpose, the realization profit/loss will not be considered. Further, if any of the solvent partner has debit balance or no balance in capital account, he will not have to contribute any amount towards his deficiency).

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 03 October 2009

So...

As sch, i dnt have that compilation wid me... I'd of 2nd grup subj. only....

But anywz, it seems the LAST AGREED CAPITAL.... compilation may hav wrong suggestion as suggested by HARSHIT... My Costing compilation had too many... So go wid LAST AGREED....