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Geeta, Sunita and Anita Were Partners in Firm Sharing Profits in the Ratio of 5:3:2. Did the Accountant Give Correct Treatment? Given Reason in Support of Your Answer. - CBSE (Arts) Class 12 - Accountancy

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Question

Anant, Gulab and Khushbu were partners in a firm sharing profits in the ratio of 5: 3: 2. From 1.4.2014, they decided to share the profits equally. For this purpose, the goodwill of the firm was valued at Rs 2,40,000.

Pass necessary journal entry for the treatment of goodwill on the change in the profit sharing ratio of Anant, Gulab and Khushbu.

Solution

Journal
Date Particulars L.F

Dr.

Rs

Cr.

Rs

 

Gulab’s Capital A/c    Dr.

Khushbu Capital A/c   Dr.

   To Anant’s Capital A/c

(Being Gulab and Khushbu being the gaining partners compensated Anant for his share of sacrifice)

 

8,000

32,000

 

 

 

 

 

40,000

 

 

Working Notes

WN1 Calculation of Sacrifice Ratio

Old Ratio
New Ratio: 1:1:1
Sacrificing Ratio = Old Ratio – New Ratio

Anant's sacrificing ratio = `5/10 - 1/3 = 5/10`

Gulab's sacrificing ratio = `3/10 - 1/3 = (-1/30)` ⇒ Gaining

The share of Anant in firm's goodwill = `5/30 xx 240000 = 40000`

WN2 Adjustment of Goodwill
Gulab and Khushbu, being the gaining partner will pay Anant, a sacrificing partner in the ratio of
their gain i.e. 1:4

Gulab will pay = = `40000 xxx 1/5 = 8000`

Khushbu will pay = `40000 xx 4/5 = 32000`

  Is there an error in this question or solution?
Solution Geeta, Sunita and Anita Were Partners in Firm Sharing Profits in the Ratio of 5:3:2. Did the Accountant Give Correct Treatment? Given Reason in Support of Your Answer. Concept: Change in the Profit Sharing Ratio Among the Existing Partners.
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