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प्रश्न
Explain how will you deal with goodwill when new partner is not in a position to bring his share of goodwill in cash ?
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उत्तर
When the new partner is not in a position to bring his share of goodwill in cash, then goodwill account is adjusted through the old Partners’ Capital Account. New Partner’s Capital Account or Current Account is debited with his/her share of goodwill and the partners who sacrifice their share in favour of the new partner are credited in their sacrificing ratio. The following Journal entry is passed in the books of accounts.
New Partner’s Capital A/c Dr.
To Old Partners’ Capital A/c
(New partner capital account is debited with his/her share of goodwill and sacrificing Partners’ Capital Account are credited in their sacrificing ratio)
NOTE: As per the Para 16 of Accounting Standard 10, goodwill is recorded in the books only when some consideration in money or money’s worth has been paid for it. This practice is mandatory to follow. In the case of admission, retirement, death or change in profit sharing ratio among existing partners, Goodwill Account cannot be raised as no consideration is paid for it.
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संबंधित प्रश्न
Joshi, Pandey and Agarwal were partners in a firm sharing profits in the ratio of 2:2:1. On 31.3.2014, their Balance Sheet was as follows:
| Liabilities |
Amount Rs |
Assets |
Amount Rs |
|
Creditors Bills Payable Agarwal's Loan Capitals Joshi 2,10,000 Pandey 2,04,000 |
51,000 36,000 84,000
4,14,000 |
Cash Debtors Bills payable Furniture Machinery Agarwal’s Capital |
24,000 39,000 27,000 81,000 3,75,000 39,000 |
| 5,85,000 | 5,85,000 |
On 31.12.2014, Agarwal died. The partnership deed provided for the following to the executors of the deceased partner:
(a) His share in the goodwill of the firm, calculated on the basis of three year's purchase of the average profits of the last four years. The profits of the last four years were Rs 2,70,000; Rs 3,00,000; Rs 5,40,000 and Rs 8,10,000 respectively.
(b) His share in the profits of the firm till the date of his death, calculated on the basis of the average profits of the last four years.
(c) Interest @12% per annum on the credit balance, if any, in his Capital account.
(d) Interest on his loan @12% per annum.
Prepare Agarwal's Capital Account to be presented to his executors.
State ‘True’ or ‘False’:
If the goodwill account raised up, goodwill account is debited.
Verma and Sharma are partners in a firm sharing profits and losses in the ratio of 5 : 3. They admitted Ghosh as a new partner for 1/5th share of profits. Ghosh is to bring in ₹ 20,000 as capital and ₹ 4,000 as his share of goodwill premium. Give the necessary Journal entries:
(a) When the amount of goodwill is retained in the business.
(b) When the amount of goodwill is fully withdrawn.
(c) When 50% of the amount of goodwill is withdrawn.
(d) When goodwill is paid privately.
X and Y are partners with capitals of ₹ 50,000 each. They admit Z as a partner for 1/4th share in the profits of the firm. Z brings in ₹ 80,000 as his share of capital. The Profit and Loss Account showed a credit balance of ₹ 40,000 as on date of admission of Z.
Give necessary journal entries to record the goodwill.
A and B are partners in a firm with capital of ₹ 60,000 and ₹ 1,20,000 respectively. They decide to admit C into the partnership for 1/4th share in the future profits. C is to bring in a sum of ₹ 70,000 as his capital. Calculate amount of goodwill.
Anil and Sunil are partners in a firm with fixed capitals of ₹ 3,20,000 and ₹ 2,40,000 respectively. They admitted Charu as a new partner for 1/4th share in the profits of the firm on 1st April, 2012. Charu brought ₹ 3,20,000 as her share of capital.
Calculate value of goodwill and record necessary Journal entries.
Madan and Gopal are partners sharing profits in the ratio of 3 : 2. They admit Sooraj for 1/3rd share in profits on 1st April, 2019. They also decide to share future profits equally. Goodwill of the firm was valued at ₹ 5,50,000. Goodwill existed in the books of account at ₹ 1,00,000, which the partners decide to carry forward.
Sooraj is unable to bring his share of goodwill. Pass the necessary Journal entries on admission of Sooraj, if:
(a) Goodwill is not to be raised and written off; and
(b) Goodwill is to be raised and written off.
On the admission of Rao, goodwill of Murty and Shah is valued at ₹ 30,000. Rao is to get 1/4th share of profits. Previously Murty and Shah shared profits in the ratio of 3 : 2. Rao is unable to bring amount of goodwill. Give Journal entries in the books of Murty and Shah when:
(a) there is no Goodwill Account and
(b) Goodwill appears in the books at ₹ 10,000.
Vinay and Naman are partners sharing profits in the ratio of 4 : 1. Their capitals were ₹ 90,000 and ₹ 70,000 respectively. They admitted Prateek for 1/3 share in the profits. Prateek brought ₹ 1,00,000 as his capital. Calculate the value of firm's goodwill.
When goodwill is withdrawn by the partner ________ account is credited.
Write a word/phrase/term which can substitute the following statement.
Method under which calculation of goodwill is done on the basis of extra profit earned above the normal profit.
Amount of old goodwill already appearing in the books will be written off:
The amount of goodwill is paid by the new partner:
Suresh, Ramesh and Tushar were partners of a firm sharing profits in the ratio of 6:5:4. Ramesh retired and his capital after making adjustments on account of reserves, revaluation of assets and reassessment of liabilities stood at ₹ 2,50,400. Suresh and Tushar agreed to pay him ₹ 2,90,000 in full settlement of his claim. Pass necessary journal entry for the treatment of goodwill. Show workings clearly.
Gini, Bini and Mini were in partnership sharing profits and losses in the ratio of 5:2:2. Their Balance Sheet as at 31st March, 2021 was as follows:
| Balance Sheet as at 31st March,2021 | |||||
| Liabilities | Amount (₹) | Assets | Amount (₹) | ||
| Sundry Creditors | 56,500 | Cash | 1,17,300 | ||
| Bank Overdraft | 61,500 | Debtors | 38,000 | ||
| Workmen’s Compensation Reserve | 32,000 | Less: Provision For Doubtful Debts | (2,300) | 35,700 | |
| Capitals: | Inventories | 1,34,000 | |||
| Gini | 4,60,000 | Machinery | 1,00,000 | ||
| Bini | 3,00,000 | Furniture | 1,80,000 | ||
| Mini | 2,90,000 | 10,50,000 | Building | 5,70,000 | |
| Goodwill | 63,000 | ||||
| 12,00,000 | 12,00,000 | ||||
On 31st March, 2021, Gini retired from the firm. All the partners agreed to revalue the assets and liabilities on the following basis:
- Bad debts amounted to ₹ 5,000. A provision for doubtful debts was to be maintained at 10% on debtors.
- Partners have decided to write off existing goodwill.
- Goodwill of the firm was valued at ₹ 54,000 and be adjusted into the Capital Accounts of Bini and Mini, who will share profits in future in the ratio of 5:4.
- The assets and liabilities valued as: Inventories ₹1,30,000; Machinery ₹ 82,000; Furniture ₹1,95,000 and Building ₹ 6,00,000.
- Liability of ₹23,000 is to be created on account of Claim for Workmen Compensation.
- There was an unrecorded investment in shares of ₹ 25,000. It was decided to pay off Gini by giving her unrecorded investment in full settlement of her part payment of ₹ 28,000 and remaining amount after two months.
Prepare Revaluation Account and Partners’ Capital Accounts as on 31st March, 2021.
Hem and Nern are partners in firm sharing profits in the ratio of 3:2. Their capitals were Rs. 80,000 and Rs. 50,000 respectively. They admitted Sam on Jan. 1 2019 as a new partner for 1/5 share in the future profits. Sam brought Rs. 60,000 as his capital. Calculate the value of goodwill of the firm.
What would be the journal entry for revaluation of an increase in the value of a liability?
If goodwill is not brought in cash by the new partner, it should be debited to his ______ Account.
Goodwill is a/an ______ asset.
Analyse the case given below and answer the question that follow:
Alia, Karan and Shilpa were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Goodwill appeared in their books at the value of ₹ 60,000. Karan decided to retire from the firm. On the date of his retirement, goodwill of the firm was valued at ₹ 2,40,000. The new profit sharing ratio decided among Alia and Shilpa was 2 : 3. Give the answer to the question given below:
What amount of goodwill will be transferred to Karan's Capital account?
When the incoming partner brings his share of premium for goodwill in cash, it is adjusted by crediting to ______.
Chaman, Raman, and Suman are partners sharing profits in the ratio of 5:3:2. Raman retires. The new profit-sharing ratio between Chaman and Suman will be 1:1. The goodwill of the firm is valued at ₹1,00,000. Raman's share of goodwill will be adjusted.
Govind, Hari and Pratap are partners. On the retirement of Govind, the goodwill already appears on the Balance Sheet at ₹24,000. The goodwill will be written off ______
Mohit and Govind were partners in a firm with a ratio of 1:2. They admitted Ravi for 1/5th share in profits. He brought ₹2,50,000 for capital but could not bring goodwill. The goodwill of the firm was valued at ₹3,00,000. What Journal Entry will be passed for the treatment of goodwill?
Profit for 2015, 2016 & 2017 is ₹ 10,000, ₹ 15,000 & ₹ 25,000. Calculate average profit.
Aayush and Aarushi are partners sharing profits and losses in the ratio of 3 : 2. They admitted Naveen into partnership for 1/4th share. Goodwill of the firm was to be valued at three years' purchase of super profits. Average net profit of the firm was ₹ 20,000. Capital investment in the business was ₹ 50,000 and Normal Rate of Return was 10%. Calculate the amount of Goodwill premium brought by Naveen.
Calculate goodwill of a firm on the basis of three years purchases of the Weighted Average Profits of the last four years. The profits of the last four years were:
| Years (ending 31st march) | 2020 | 2021 | 2022 | 2023 |
| Amount | 28,000 | 27,000 | 46,900 | 53,810 |
- On 1st April, 2020 a major plant repair was undertaken for ₹ 10,000 which was charged to revenue. The said sum is to be capitalized for goodwill calculation subject to adjustment of depreciation of 10% on reducing balance method.
- For the purpose of calculating Goodwill the company decided that the years ending 31.03.2020 and 31.03.2021 be weighted as 1 each (being COVID affected) and for year ending 31.03.2022 and 31.03.2023 weights be taken as 2 and 3 respectively.
Complete the following Table:
| ? | = | `"Total Profit"/"Number of Years"` |
On 1st April, 2020, Anish started a business with a capital of ₹ 3,00,000.
During the three years ending 31st March, 2023, the results of his business were:
| Year | (₹) | |
| 2020-21 | Loss | 20,000 |
| 2021-22 | Profit | 34,000 |
| 2022-23 | Profit | 46,000 |
From the year 2020-21 to the year 2022-23, Anish withdrew ₹ 30,000 from the firm for his personal use.
On 1st April, 2023, he admitted Danish into partnership on the following terms:
- Goodwill of the firm to be valued at two years’ purchase of the average profits of the last three years.
- Danish to have a `1/4` share in the future profits.
- Danish’s capital is to be equal to `1/4` of Anish’s capital determined on 1st April, 2023, after the goodwill compensation has been taken into account.
You are required to give:
- The formula to calculate goodwill by the Average Profit Method.
- The value of self-generated goodwill of the firm.
- Danish’s capital contribution.
