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Pass Necessary Journal Entries.

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प्रश्न

A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. They admit C into partnership for 1/5th share. C brings ₹ 30,000 as capital and ₹ 10,000 as goodwill. At the time of admission of C, goodwill appeared in the Balance Sheet of A and B at ₹ 3,000. New profit-sharing ratio of the partners will be 5 : 3 : 2. Pass necessary Journal entries.

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उत्तर

Journal Entries

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

A’s Capital A/c

Dr.

 

1,800

 

 

B’s Capital A/c

Dr.

 

1,200

 

 

            To Goodwill A/c

 

 

 

3,000

 

(Goodwill written-off)

 

 

 

 

 

 

 

 

 

 

 

Cash A/c

Dr.

 

40,000

 

 

         To C’s Capital A/c

Dr.

 

 

30,000

 

         To Premium for Goodwill A/c

 

 

 

10,000

 

(C brought capital and his share of goodwill in cash)

 

 

 

 

 

 

 

 

 

 

Premium for Goodwill

Dr.

 

10,000

 

 

          To A’s Capital A/c

 

 

 

5,000

 

           To B’s Capital A/c

 

 

 

5,000

 

(Premium for Goodwill distributed)

 

 

 

 

Old Ratio = A : B
                = 3 : 2
New Ratio = A : B : C
                  = 5 : 3 : 2
Sacrificing Ratio = Old Ratio − New Ratio
A's = `3/5 - 5/10 = 1/10`

B's = `2/5 - 3/10 = 1/10`

Sacrificing Ratio = A : B
                           = `1/10 : 1/10` = 1 : 1
Distribution of Premium for Goodwill C’s share of Goodwill)
A and B each will get = 10,000 x `1/2` = Rs. 5,000 each

Goodwill written-off :
 A will be debited by 3,000 x `3/5` = Rs. 1,800.
B will be credited by 3,000 x `2/5` = Rs. 1,200.

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अध्याय 4: Admission of a Partner - Exercises [पृष्ठ ८८]

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टीएस ग्रेवाल Accountancy Double Entry Book Keeping Volume 1 and 2 [English] Class 12
अध्याय 4 Admission of a Partner
Exercises | Q 29 | पृष्ठ ८८

वीडियो ट्यूटोरियलVIEW ALL [2]

संबंधित प्रश्न

State any three circumstances other than (i) admission of a new partner; (ii) retirement of a partner and (iii) death of a partner, when need for valuation of goodwill of a firm may arise.


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.


On1.4.2014 the Balance Sheet of Anant, Sampat and Gunvant was as follows :

Liabilities

Amount

Rs

Assets

Amount

Rs

Sundry Creditors

General Reserve

Capital Reserve

    Anant    30,000

   Sampat   15,000

   Gunvant  15,000

9,000

9,600

 

 

 

60,000

Bank

Bills Receivables

Stock

Tools

Furniture

 

15,600

18,000

18,000

3,000

24,000

 

  78,600   78,600

Gunvant died on 30.9.2014. Under the terms of Partnership Deed, the executors of the deceased partner were entitled to:

(a) The amount standing to the credit of partner's capital account.
(b) Interest on capital @12% per annum.
(c) A share of goodwill on the basis of twice the average of past three years profits.
(d) A share of profit from the closing of last financial year to the date of death on the basis of last year's profit.

The profits of the last three years were as follows:

Year Profit
2011 - 2012 18.000
2012 - 2013 21,000
2013 - 2014 24,000

The firm closes its books on 31st March every year. Partners share profits in the ratio of their capitals.
Prepare Gunvant's Capital Account to be presented to his executors


How does the market situation affect the value of goodwill of a firm?


How does the nature of business affect the value of goodwill of a firm? 


What is a Goodwill?

 


State 'True' or 'False'
The goodwill brought in by the new partner is shared by all partners.


State ‘True’ or ‘False’:

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


Aparna, Manisha and Sonia are partners sharing profits in the ratio of 3:2:1. Manisha retires and goodwill of the firm is valued at Rs 1,80,000. Aparna and Sonia decided to share future in the ratio of 3:2. Pass necessary Journal entries.


Explain how will you deal with goodwill when new partner is not in a position to bring his share of goodwill in cash ?


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.


M and J are partners in a firm sharing profits in the ratio of 3 : 2. They admit R as a new partner. The new profit-sharing ratio between M, J and R will be 5 : 3 : 2. R brought in ₹ 25,000 for his share of premium for goodwill. Pass necessary Journal entries for the treatment of goodwill.


A and B are partners sharing profits and losses in the ratio of 2 : 1. They take C as a partner for 1/5th share. Goodwill Account appears in the books at ₹ 15,000. For the purpose of C's admission, goodwill of the firm is valued at ₹ 15,000. C is to pay proportionate amount as premium for goodwill which he pays to A and B privately. Pass necessary entries.


Write a word/phrase/term which can substitute the following statement.

Reputation of business measured in terms of money.


Why is a new partner admitted?


What is the super profit method of calculation of goodwill?


Amount brought by a new partner for his share in goodwill is known as _____________.


In the absence of partnership deed, interest on capital and drawing to be:


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


Value of reputation of the firm is:


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.


Jaya, Kirti, Ekta and Shewta are partners in the firm sharing profits and losses in the ratio of 2:1:2:1. On Jaya's retirement, the goodwill of the firm is valued at Rs. 36,000. Kirti, Ekta and Shewta decided to share future profits equally. What will be the necessary journal entry for the treatment of goodwill without opening a 'Goodwill Account'.


Excess value of Purchase Consideration over Net Assets at the time of purchase of business is credited to:


When the incoming partner brings his share of premium for goodwill in cash, it is adjusted by crediting to ______.


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.


G, S and T were partners sharing profits in the ratio 3:2:1. G retired and his dues towards the firm including Capital balance, Accumulated profits and losses share, Revaluation Gain amounted to ₹ 5,80,000. G was being paid ₹ 7,00,000 in full settlement. For giving that additional amount of ₹ 1,20,000, S was debited for ₹ 40,000. Determine goodwill of the firm.


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.

Choose the components required to calculate goodwill of a firm by capitalisation of average profits method.

P: The normal profits of a similar firm in the industry.

Q: The average profits of the firm.

R: The number of years purchase.

S: The actual capital employed in the business.


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