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Pass Necessary Journal Entries. - Accountancy

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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.

रोजनामा प्रविष्टि
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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 5: Admission of a Partner - Exercises [पृष्ठ ८८]

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टीएस ग्रेवाल Accountancy - Double Entry Book Keeping Volume 1 [English] Class 12
अध्याय 5 Admission of a Partner
Exercises | Q 29 | पृष्ठ ८८

वीडियो ट्यूटोरियलVIEW ALL [2]

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.


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.


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


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


State 'True' or 'False'
The new partner must pay his share of goodwill in cash only.


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.


Mohan and Sohan were partners in a firm sharing profits and losses in the ratio of 3 : 2. They admitted Ram for 1/4th share on 1st April, 2019. It was agreed that goodwill of the firm will be valued at 3 years' purchase of the average profit of last 4 years ended 31st March, were ₹ 50,000 for 2015-16, ₹ 60,000 for 2016-17, ₹ 90,000 for 2017-18 and ₹ 70,000 for 2018-19. Ram did not bring his share of goodwill premium in cash. Record the necessary Journal entries in the books of the firm on Ram's admission when:
(a) Goodwill appears in the books at ₹ 2,02,500.
(b) Goodwill appears in the books at ₹ 2,500.
(c) Goodwill appears in the books at ₹ 2,05,000. 


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.


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.


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

Name the method of the treatment of goodwill where new partner will bring his share of goodwill in cash.


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.


Goodwill given in the old balance sheet will be:


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?


When there is no Goodwill Account in the books and goodwill is raised, ____________ account will be debited.


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 if goodwill is raised at full value and retained in books?


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'.


If goodwill is not brought in cash by the new partner, it should be debited to his ______ Account.


Goodwill is a/an ______ asset.


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?


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


Doremon, Shinchan and Nobita are partners sharing profits and losses in the ratio of 3 : 2 : 1. With effect from 1st April, 2022 they agree to share profits equally. For this purpose, goodwill is to be valued at two year’s purchase of the average profit of the last four years which were as follows:

Year ending on 31st March, 2019 ₹ 50,000 (Profit)
Year ending on 31st March, 2020 ₹ 1,20,000 (Profit)
Year ending on 31st March, 2021 ₹ 1,80,000 (Profit)
Year ending on 31st March, 2022 ₹ 70,000 (Loss)

On 1st April, 2021 a Motor Bike costing ₹ 50,000 was purchased and debited to travelling expenses account, on which depreciation is to be charged @ 20% p.a by Straight Line Method. The firm also paid an annual insurance premium of ₹ 20,000 which had already been charged to Profit and Loss Account for all the years.

Journalise the transaction along with the working notes.


Profit for 2015, 2016 & 2017 is ₹ 10,000, ₹ 15,000 & ₹ 25,000. Calculate average profit.


A and B were partners in a firm sharing profits equally. Their capitals were : A ₹ 1,20,000 and B ₹ 80,000. The annual rate of interest is 20%. The profits of the firm for the last three years were ₹ 34,000; ₹ 38,000 and ₹ 30,000. They admitted C as a new partner. On C's admission the goodwill of the firm was valued at 2 years purchase of the super profits.

Calculate the value of goodwill of the firm on C's admission. 


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
  1. 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.
  2. 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.

Goodwill is to be valued on the basis of 2 years purchases of last 5 years average profit. The profits and losses of last five years were as follows :

Year 1 2 3 4 5
Amount (₹) 30,000
(Profit)
40,000
(Profit)
70,000
(Profit)
30,000
(Loss)
50,000
(Profit)

Find out value of Goodwill.


Find out super profit, if capital employed is ₹ 4,00,000, normal rate of return is 12% and average profit is ₹ 60,000.


______ = Average profit x No. of years of purchase


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.


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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