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Journal Entries: (A) When the Amount of Goodwill is Retained in the Business. (B) When the Amount of Goodwill is Fully Withdrawn. - Accountancy

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प्रश्न

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(b) When the amount of goodwill is fully withdrawn.
(c) When 50% of the amount of goodwill is withdrawn.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.

रोजनामा प्रविष्टि
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उत्तर

Journal Entries

S.No.

Particulars

L.F.

Debit Amount Rs

Credit Amount Rs

Case (a)

       
 

Cash A/c

Dr.

 

24,000

 
 

To Ghosh's Capital A/c

     

20,000

 

To Premium for Goodwill A/c

     

4,000

 

(Capital and Goodwill his share broughtby Ghosh)

       
           
 

Premium for Godwill A/c

Dr.

 

4,000

 
 

To Verma's Capital A/c

     

2,500

 

To Sharma's Capital A/c

     

1,500

 

(Goodwill brought by Ghosh credited to Old Partnersin Sacrificing ratio)

     
         
Case (b)

Cash A/c

Dr.

 

24,000

 
 

To Ghosh Capital A/c

     

20,000

 

To Premium for Goodwill A/c

     

4,000

 

(Capital and Goodwill brought by Ghosh for (1/5)share of profit)

       
         
 

Premium for Goodwill A/c

Dr.

 

4,000

 
 

To Verma's Capital A/c

     

2,500

 

To Sharma's Capital A/c

     

1,500

 

(Goodwill brought by Ghosh credited in Old Partner in Sacrificing Ratio)

     
         
 

Verma's Capital A/c

Dr.

 

2,500

 
 

Sharma's Capital A/c

Dr.

 

1,500

 
 

To Cash A/c

     

4,000

 

(Amount of Premium for Goodwill withdrawn byOld Partners)

     
         
Case (c)

Cash A/c

Dr.

 

24,000

 
 

To Ghosh's Capital A/c

     

20,000

 

To Premium for Goodwill A/c

     

4,000

  (Capital and Goodwill brought by Ghosh for (1/5)share of profit)        
         
 

Premium for Goodwill A/c

Dr.

 

4,000

 
 

To Verma's Capital A/c

     

2,500

 

To Sharma's Capital A/c

     

1,500

 

(Premium for Goodwill credited to Old Partner's Capital Account in sacrificing ratio)

     
         
 

Verma's Capital A/c

Dr.

 

1,250

 
 

Sharma's Capital A/c

   

750

 
 

To Cash A/c

     

2,000

 

(Half of the amount of premium for goodwill withdrawn by Old partners)

     
         
Case (d) No entry: Goodwill was not brought into firm      
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अध्याय 5: Admission of a Partner - Exercises [पृष्ठ ९१]

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टीएस ग्रेवाल Accountancy - Double Entry Book Keeping Volume 1 [English] Class 12
अध्याय 5 Admission of a Partner
Exercises | Q 47 | पृष्ठ ९१

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संबंधित प्रश्न

Vikas, Vishal and Vaibhav were partners in a firm sharing profits in the ratio of 2:2:1. The firm closes its books 31st March every year. On 31-12-2015 Vaibhav died. On that date his Capital account showed a credit balance of Rs. 3, 80,000 and Goodwill of the firm was valued at 1, 20,000. There was a debit balance of Rs. 50,000 in the profit and loss account. Vaibhav's share of profit in the year of his death was to be calculated on the basis of the average profit of last five years. The average profit of last five years was Rs. 75,000.

Pass necessary journal entries in the books of the firm on Vaibhav's death.


Hemant and Nishant were partners in the firm sharing profits in the ratio of 3:2. Their capitals were Rs 1,60,000 and Rs 1,00,000 respectively. They admitted Somesh on 1st April 2013 as a new partner for 1/5 share in the future profits. Somesh brought Rs 1,20,000 as his capital. Calculate the value of goodwill of the firm and record necessary journal entries for the above transactions on Somesh's admission.


Select the most appropriate answer from the alternative given below and rewrite the sentence.

When goodwill is withdrawn by old partners ________________ a/c is credited.


State 'True' or 'False'
When goodwill is paid privately, no entry in the books of account is required.


State ‘True’ or ‘False’:

If the goodwill account raised up, goodwill account is debited.


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.


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.


A and B are partners sharing profits in the ratio of 2 : 1. They admit C for a `1/4`th share in profits. C brings in ₹ 30,000 for his capital and ₹ 8,000 out of his share of ₹ 10,000 for goodwill. Before admission, goodwill appeared in books at ₹ 18,000. Give Journal entries to give effect to the above arrangement.

Hints:

  1. Goodwill of ₹ 18,000 written off by A and B in 2 : 1.
  2. Goodwill of ₹ 8,000 brought in cash by C will be credited to the Premium for Goodwill A/c.
  3. Premium for Goodwill A/c will be debited by ₹ 8,000 and C’s Current A/c will be debited by ₹ 2,000 and the Capital Accounts of A and B will be credited in 2 : 1.

Anu and Bhagwan were partners in a firm sharing profits in the ratio of 3 : 1. Goodwill appeared in the books at ₹ 4,40,000. Raja was admitted to the partnership. The new profit-sharing ratio among Anu, Bhagwan and Raja was 2 : 2 : 1. Raja brought ₹ 1,00,000 for his capital and necessary cash for his goodwill premium. Goodwill of the firm was valued at ₹ 2,50,000. Record necessary Journal entries in the books of the firm for the above transactions.


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.


State True or False with reason.

When goodwill is paid privately to the partners, it is not recorded in the books.


State True or False with reason.

A new partner always bring his share of goodwill in cash.


Find the Odd one.


What is the super profit method of calculation of goodwill?


State the ratio in which the old partner’s Capital A/c will be credited for goodwill when the new partner does not bring his share of goodwill in cash?


Goodwill given in the old balance sheet will be:


Which items may appear on the credit side of the partner's current account?


Old partnership will dissolve if:


The amount of goodwill is paid by the new partner:


Madhav, Madhusudan and Mukund were partners in Jaganath Associates. They decided to dissolve the firm on 31st March 2021. Pass necessary journal entries for the following transactions after various assets (other than cash) and third-party liabilities have been transferred to realization account:

  1. Old machine fully written off was sold for ₹ 42,000 while a payment of ₹ 6,000 is made to bank for a bill discounted being dishonoured.
  2. Madhusudan accepted an unrecorded asset of ₹80,000 at ₹75,000 and the balance through cheque, against the payment of his loan to the firm of ₹1,00,000.
  3. Stock of book value of ₹30,000 was taken by Madhav, Madhusudan and Mukund in their profit sharing ratio.
  4. The firm had paid realization expenses amounting to ₹5,000 on behalf of Mukund.
  5. There was a vehicle loan of ₹ 2,00,000 which was paid by surrender of asset to the bank at an agreed value of ₹ 1,40,000 and the shortfall was met from firm’s bank account.

Which method is followed when the new partner does not bring in his share of goodwill in cash.


What would be the journal entry for revaluation of an increase in the value of an asset?


What would be the journal entry for if goodwill is raised at full value and retained in books?


Harry, Pammy and Sunny are partners sharing profits in the ratio of 3:2:1. Goodwill is appearing in the books at a value of Rs. 60, 000. What is the journal entry for the following case?


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?


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?


Identify the formula for calculating goodwill with the help of capitalised method of super profit.


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. 


Manas and Mili are partners in a firm sharing profits in the ratio of 3 : 2. Anita is admitted as a new partner for `1/4`th share in future profits. Capitals of Manas and Mili were ₹ 3,00,000 and ₹ 1,50,000 respectively. Anita brought ₹  2,00,000 as her capital. The value of goodwill of the firm on Anita's admission.


Nita and Samar are partners in a firm sharing profits in the ratio of 3 : 2. Their fixed capitals were ₹ 90,000 and ₹ 2,10,000 respectively. They admitted Mitali on April 1, 2022 as a new partner for 1/5th share in future profits. Mitali brought ₹ 1,50,000 as her capital. The value of goodwill of the firm of Mitali's admission was ______.


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:

  1. Goodwill of the firm to be valued at two years’ purchase of the average profits of the last three years.
  2. Danish to have a `1/4` share in the future profits.
  3. 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:

  1. The formula to calculate goodwill by the Average Profit Method.
  2. The value of self-generated goodwill of the firm.
  3. Danish’s capital contribution.

Aman and Vinod are partners in a firm. Their Balance Sheet showed:

Gross Debtors: ₹ 1,52,000

Provision for doubtful debts: ₹ 1,000

On Milin’s admission as a new partner, the assets and liabilities are to be revalued as:

  1. Unaccounted accrued income of ₹ 10,000 to be provided for.
  2. Bills Payable of ₹ 10,000 which were recorded, to be discharged at a rebate of 10%.
  3. Debtors of ₹ 2,000 to be irrecoverable.
  4. Provision for doubtful debts to be provided @ 2% of the debtors.

What is the net effect of revaluation of assets and liabilities?


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