मराठी

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 (B) When the Amount of Goodwill is Fully Withdrawn.

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(b) When the amount of goodwill is fully withdrawn.
(c) When 50% of the amount of goodwill is withdrawn.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

रोजकीर्द नोंद
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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(Amount of Premium for Goodwill withdrawn byOld Partners)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(Half of the amount of premium for goodwill withdrawn by Old partners)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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पाठ 4: Admission of a Partner - Exercises [पृष्ठ ९१]

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टीएस ग्रेवाल Accountancy Double Entry Book Keeping Volume 1 and 2 [English] Class 12
पाठ 4 Admission of a Partner
Exercises | Q 47 | पृष्ठ ९१

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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.


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'
The goodwill brought in by a new partner is shared by the old partners.


State ‘True’ or ‘False’:

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


State True or False with reason.

When goodwill is written off, goodwill amount is debited.


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


Asin and Shreyas are partners in a firm. They admit Ajay as a new partner with 1/5th share in the profits of the firm. Ajay brings ₹ 5,00,000 as his share of capital. The value of the total assets of the firm was ₹ 15,00,000 and outside liabilities were valued at ₹ 5,00,000 on that date. Give the necessary Journal entry to record goodwill at the time of Ajay's admission. Also show your workings.


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.


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.


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.


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.


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.


Keith, Bina, and Veena were partners in firm sharing profits and losses equally. Their balance sheet as on 31-3-2019 was as follows: 

Balance Sheet of Keith, Bina, and Veena as on 31-3-2019 

Liabilities

Amount (₹)

Amount (₹)

Assets Amount (₹)
Capitals:

 

 

3,25,000

Plant and Machinery 2,40,000
Keith 1,50,000 Stock  60,000
Bina  1,00,000 Sundry debtors 35,000
Veena 

75,000

Cash at bank  50,000
General Reserve

 

30,000

   
Sundry creditors

 

30,000

   
    3,85,000   3,85,000

Veena died on 30th June 2019. According to the partnership deed, the executors of the deceased partner were entitled to :

  1. Balance in the capital account
  2. Salary till the date of death @ ₹ 25,000 per annum.
  3. Share of goodwill calculated on the basis of twice the average profits of the past three years.
  4. Share of profit from the closure of the last accounting year till the date of death on the basis of the average of three completed years profits before death.
  5. Profits for 2016-17, 2017-18 and 2018-19 were ₹ 1,20,000, ₹ 90,000 and ₹ 1,50,000 respectively.

Veena withdrew ₹ 15,000 on 1st June 2019 for paying her daughter’s school fees. 

Prepare Veena’s capital account to be rendered to her executors.


When goodwill is withdrawn by the partner ________ account is credited.


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.


What is the super profit method of calculation of goodwill?


Value of reputation of the firm is:


Amount of old goodwill already appearing in the books will be written off:


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:

  1. Bad debts amounted to ₹ 5,000. A provision for doubtful debts was to be maintained at 10% on debtors.
  2. Partners have decided to write off existing goodwill.
  3. 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.
  4. The assets and liabilities valued as: Inventories ₹1,30,000; Machinery ₹ 82,000; Furniture ₹1,95,000 and Building ₹ 6,00,000.
  5. Liability of ₹23,000 is to be created on account of Claim for Workmen Compensation.
  6. 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.


When the new partner is admitted goodwill can be treated in how many ways?


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?


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


When the value of goodwill is not specified at the time of admission of a partner is called ______.


How is Goodwill of the firm created?


Fill in the blank.

______  =  `("Total Profit")/("Number of Years")`


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.


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.


______ means profit which is earned over and above the normal profit.


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