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Question
A and B are partners sharing profits in the ratio of 3 : 2. Their books show goodwill at ₹ 2,000. C is admitted as partner for 1/4th share of profits and brings in ₹ 10,000 as his capital but is not able to bring in cash for his share of goodwill ₹ 3,000. Draft Journal entries.
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Solution
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Journal |
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Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
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A’s Capital A/c |
Dr. |
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1,200 |
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B’s Capital A/c |
Dr. |
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800 |
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To Goodwill A/c |
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2,000 |
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(Goodwill written-off at the time of |
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Cash A/c |
Dr. |
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10,000 |
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To C’s Capital A/c |
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10,000 |
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(Capital brought by C) |
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C’s Capital A/c |
Dr. |
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3,000 |
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To A’s Capital A/c |
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1,800 |
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To B’s Capital A/c |
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1,200 |
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(C’s share of capital charged from his capital distributed between A and B in their sacrificing ratio) |
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Working Notes:
Writing off of goodwill already in the books (JE 1)
A's Account will be debited with = 3000 x `3/5` = 1,200
B's Account will be debited with = 3000 x `2/5` = 800
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RELATED QUESTIONS
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Hints:
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Keith, Bina, and Veena were partners in firm sharing profits and losses equally. Their balance sheet as on 31-3-2019 was as follows:
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Balance Sheet of Keith, Bina, and Veena as on 31-3-2019 |
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| Liabilities |
Amount (₹) |
Amount (₹) |
Assets | Amount (₹) |
| Capitals: |
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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 |
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30,000 |
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| Sundry creditors |
|
30,000 |
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| 3,85,000 | 3,85,000 | |||
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Write a word/phrase/term which can substitute the following statement.
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Which items may appear on the credit side of the partner's current account?
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| 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 | ||||
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- The assets and liabilities valued as: Inventories ₹1,30,000; Machinery ₹ 82,000; Furniture ₹1,95,000 and Building ₹ 6,00,000.
- Liability of ₹23,000 is to be created on account of Claim for Workmen Compensation.
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Fill in the blank.
______ = `("Total Profit")/("Number of Years")`
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Calculate the value of goodwill of the firm on C's admission.
Complete the following Table:
| ? | = | `"Total Profit"/"Number of Years"` |
Find out super profit, if capital employed is ₹ 4,00,000, normal rate of return is 12% and average profit is ₹ 60,000.
______ means profit which is earned over and above the normal profit.
