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Question
State True or False with reason.
A new partner always bring his share of goodwill in cash.
Options
True
False
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Solution
This statement is False.
Reason:
When a new person is admitted to the partnership firm, the old partners surrender a certain share in profit and give it to a new partner. In exchange for that new partner is required to bring goodwill in cash or in kind. If he is unable to bring cash for goodwill, then Goodwill is raised and adjusted to the new partner’s capital A/c.
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State True or False with reason.
Cash/ Bank Account is credited when goodwill is withdrawn by the old partners.
Find the Odd one.
What is the super profit method of calculation of goodwill?
Goodwill given in the old balance sheet will be:
Amount brought by a new partner for his share in goodwill is known as _____________.
Value of reputation of the firm is:
____________ profit is excess of actual profits over normal profits.
Old partnership will dissolve if:
The amount of goodwill is paid by the new partner:
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- Stock of book value of ₹30,000 was taken by Madhav, Madhusudan and Mukund in their profit sharing ratio.
- The firm had paid realization expenses amounting to ₹5,000 on behalf of Mukund.
- There was a vehicle loan of ₹ 2,00,000 which was paid by surrender of asset to the bank at an agreed value of ₹ 1,40,000 and the shortfall was met from firm’s bank account.
Which method is followed when the new partner does not bring in his share of goodwill in cash.
Analyse the case given below and answer the question that follow:
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Fill in the blank.
______ = `("Total Profit")/("Number of Years")`
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| ? | = | `"Total Profit"/"Number of Years"` |
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During the three years ending 31st March, 2023, the results of his business were:
| Year | (₹) | |
| 2020-21 | Loss | 20,000 |
| 2021-22 | Profit | 34,000 |
| 2022-23 | Profit | 46,000 |
From the year 2020-21 to the year 2022-23, Anish withdrew ₹ 30,000 from the firm for his personal use.
On 1st April, 2023, he admitted Danish into partnership on the following terms:
- Goodwill of the firm to be valued at two years’ purchase of the average profits of the last three years.
- Danish to have a `1/4` share in the future profits.
- Danish’s capital is to be equal to `1/4` of Anish’s capital determined on 1st April, 2023, after the goodwill compensation has been taken into account.
You are required to give:
- The formula to calculate goodwill by the Average Profit Method.
- The value of self-generated goodwill of the firm.
- Danish’s capital contribution.
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:
- Unaccounted accrued income of ₹ 10,000 to be provided for.
- Bills Payable of ₹ 10,000 which were recorded, to be discharged at a rebate of 10%.
- Debtors of ₹ 2,000 to be irrecoverable.
- Provision for doubtful debts to be provided @ 2% of the debtors.
What is the net effect of revaluation of assets and liabilities?
