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Abhay and Beena Are Partners in a Firm. They Admit Chetan as a Partner with 1/4 Th Shares in the Profits of the Firm. Chetan Brings Rs 2,00,000 as His Share of Capital. the Value of the Total Assets of the Firm is Rs 40,000 and Outside Liabilities Are Valued at Rs 1,00,000 on that Date. Give the Necessary Entry to Record Goodwill at the Time of Chetan'S Admission. Also, Show Your Working Notes. - CBSE (Arts) Class 12 - Accountancy

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Question

Abhay and Beena are partners in a firm. They admit Chetan as a partner with 1/4 th shares in the profits of the firm. Chetan brings Rs 2,00,000 as his share of capital. The value of the total assets of the firm is Rs 540,000 and outside liabilities are valued at Rs 1,00,000 on that date. Give the necessary entry to record goodwill at the time of Chetan's admission. Also, show your working notes.

Solution

Journal
Date Particulars L.F.

Dr.

Rs

Cr.

Rs

 

Bank A/c             Dr.

       To Chetan's Capital A/c

(Being Chetan brought his share of capital)

 

2,00,000

 

 

 

 

2,00,000

 

 

 

Chetan's Capital A/c      Dr.

     To Abhay's Capital A/c

     To Beena's Capital A/c

(Being Chetan's Share of Goodwill distributed among old partners in their sacrificing ratio 1:1)

 

90,000

 

 

 

 

45,000

45,000

 

Capital employed = Total assets(+chetan's capital) - outsiders liability = 7,40,000 - 1,00,000 = 6,40,000

New capital of the firm = Chetan's capital x reciprocal of his share.

= 2,00,000 x 4/1 = 8,00,000

Hidden goodwill = New capital - capital employed = 8,00,000-6,40,000 = 1,60,000

Chetan's share in good will = 1,60,000 x1/4 = 40,000

Sacrificing ratio = 1:1

Entry

(i) Cash a/c dr. 2,40,000

To chetan's capital 2,00,000

To premium for goodwill a/c 40,000

( Being capital and goodwill brought in

by chetan)

(ii) Chetan's capital a/c dr. 40,000

To Abhay's capital a/c 20,000

To Beena's capital a/c 20,000

( Being goodwill shared in sacrificing ratio

to existing partners and chetan's account debited)

  Is there an error in this question or solution?
Solution Abhay and Beena Are Partners in a Firm. They Admit Chetan as a Partner with 1/4 Th Shares in the Profits of the Firm. Chetan Brings Rs 2,00,000 as His Share of Capital. the Value of the Total Assets of the Firm is Rs 40,000 and Outside Liabilities Are Valued at Rs 1,00,000 on that Date. Give the Necessary Entry to Record Goodwill at the Time of Chetan'S Admission. Also, Show Your Working Notes. Concept: Admission of a Partner - Treatment of Goodwill.
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