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Pass Necessary Journal Entries. - Accountancy

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प्रश्न

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.

रोजकीर्द नोंद

उत्तर

Journal Entries

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

A’s Capital A/c

Dr.

 

1,800

 

 

B’s Capital A/c

Dr.

 

1,200

 

 

            To Goodwill A/c

 

 

 

3,000

 

(Goodwill written-off)

 

 

 

 

 

 

 

 

 

 

 

Cash A/c

Dr.

 

40,000

 

 

         To C’s Capital A/c

Dr.

 

 

30,000

 

         To Premium for Goodwill A/c

 

 

 

10,000

 

(C brought capital and his share of goodwill in cash)

 

 

 

 

 

 

 

 

 

 

Premium for Goodwill

Dr.

 

10,000

 

 

          To A’s Capital A/c

 

 

 

5,000

 

           To B’s Capital A/c

 

 

 

5,000

 

(Premium for Goodwill distributed)

 

 

 

 

Old Ratio = A : B
                = 3 : 2
New Ratio = A : B : C
                  = 5 : 3 : 2
Sacrificing Ratio = Old Ratio − New Ratio
A's = `3/5 - 5/10 = 1/10`

B's = `2/5 - 3/10 = 1/10`

Sacrificing Ratio = A : B
                           = `1/10 : 1/10` = 1 : 1
Distribution of Premium for Goodwill C’s share of Goodwill)
A and B each will get = 10,000 x `1/2` = Rs. 5,000 each

Goodwill written-off :
 A will be debited by 3,000 x `3/5` = Rs. 1,800.
B will be credited by 3,000 x `2/5` = Rs. 1,200.

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पाठ 5: Admission of a Partner - Exercises [पृष्ठ ८८]

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टीएस ग्रेवाल Accountancy - Double Entry Book Keeping Volume 1 [English] Class 12
पाठ 5 Admission of a Partner
Exercises | Q 29 | पृष्ठ ८८

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संबंधित प्रश्‍न

Vikas, Vishal and Vaibhav were partners in a firm sharing profits in the ratio of 2:2:1. The firm closes its books 31st March every year. On 31-12-2015 Vaibhav died. On that date his Capital account showed a credit balance of Rs. 3, 80,000 and Goodwill of the firm was valued at 1, 20,000. There was a debit balance of Rs. 50,000 in the profit and loss account. Vaibhav's share of profit in the year of his death was to be calculated on the basis of the average profit of last five years. The average profit of last five years was Rs. 75,000.

Pass necessary journal entries in the books of the firm on Vaibhav's death.


Vivek, Viney and Vijay were partners in a firm sharing profits in the ratio of 2:1:2. The firm closes its books on 31st March every year. On 31-12-2014 Viney died. On that date his capital account showed a debit balance of Rs 10,000 and Goodwill of the firm was valued at Rs 2, 40,000. There was a debit balance of Rs 7,000 in the profit and loss account. Viney's share of profit in the year of his death will be calculated on the basis of average profit of last 5 years which was Rs 90,000.

Pass necessary journal entries in the books of the firm on Viney's death.


Kumar, Gupta and Kavita were partners in the firm sharing profits and losses equally. The firm was engaged in the storage and distribution of canned juice and its godowns were located at three different places in the city. Each godown was being managed individually by Kumar, Gupta and Kavita. Because of increase in business activities at the godown managed by Gupta, he had devoted more time. Gupta demanded that his share in the profits of the firm be increased, to which Kumar and Kavita agreed. The new profit sharing ratio was agreed to be 1: 2: 1. For this purpose, the goodwill of the firm was valued at two years purchase of the average profits of last five years. The profits of the last five years were as follows :

  Years

Profit

Rs

I   4,00,000
II   4,80,000
II   7,33,000
IV Loss 33,000
V   2,20,000

You are required to:

1) Calculate the goodwill of the firm

2) Pass necessary Journal Entry for the treatment of goodwill on the change in profit sharing ratio of Kumar, Gupta and Kavita.


How does the market situation affect the value of goodwill of a firm?


State 'True' or 'False'
When goodwill is paid privately, no entry in the books of account is required.


State 'True' or 'False'
The new partner must pay his share of goodwill in cash only.


State True or False with reason.

When goodwill is written off, goodwill amount is debited.


State 'True' or 'False'
On admission of a partner, the amount of goodwill brought in cash is credited to goodwill account.


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.


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.


M and J are partners in a firm sharing profits in the ratio of 3 : 2. They admit R as a new partner. The new profit-sharing ratio between M, J and R will be 5 : 3 : 2. R brought in ₹ 25,000 for his share of premium for goodwill. Pass necessary Journal entries for the treatment of goodwill.


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.


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(₹)

Assets Amount(₹)
Capitals :

 

Plant and Machinery 2,40,000
Keith - 1,50,000   Stock  60,000
Bina - 1,00,000   Sundry debtors 35,000
Veena - 75,000

3,25,000

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 :
(a) Balance in the capital account
(b) Salary till the date of death @ ₹ 25,000 per annum.
(c) Share of goodwill calculated on the basis of twice the average profits of the past three years.
(d) 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.
(e) 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.


Write a word/phrase/term which can substitute the following statement.

Name the method of the treatment of goodwill where new partner will bring his share of goodwill in cash.


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.

Cash/ Bank Account is credited when goodwill is withdrawn by the old partners.


Find the Odd one.


Why is a new partner admitted?


What is the super profit method of calculation of goodwill?


State the ratio in which the old partner’s Capital A/c will be credited for goodwill when the new partner does not bring his share of goodwill in cash?


Amount brought by a new partner for his share in goodwill is known as _____________.


In the absence of partnership deed, interest on capital and drawing to be:


Which items may appear on the credit side of the partner's current account?


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


When there is no Goodwill Account in the books and goodwill is raised, ____________ account will be debited.


Suresh, Ramesh and Tushar were partners of a firm sharing profits in the ratio of 6:5:4. Ramesh retired and his capital after making adjustments on account of reserves, revaluation of assets and reassessment of liabilities stood at ₹ 2,50,400. Suresh and Tushar agreed to pay him ₹ 2,90,000 in full settlement of his claim. Pass necessary journal entry for the treatment of goodwill. Show workings clearly.


Madhav, Madhusudan and Mukund were partners in Jaganath Associates. They decided to dissolve the firm on 31st March 2021. Pass necessary journal entries for the following transactions after various assets (other than cash) and third-party liabilities have been transferred to realization account:

  1. Old machine fully written off was sold for ₹ 42,000 while a payment of ₹ 6,000 is made to bank for a bill discounted being dishonoured.
  2. Madhusudan accepted an unrecorded asset of ₹80,000 at ₹75,000 and the balance through cheque, against the payment of his loan to the firm of ₹1,00,000.
  3. Stock of book value of ₹30,000 was taken by Madhav, Madhusudan and Mukund in their profit sharing ratio.
  4. The firm had paid realization expenses amounting to ₹5,000 on behalf of Mukund.
  5. 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.

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?


If goodwill is not brought in cash by the new partner, it should be debited to his ______ Account.


Analyse the case given below and answer the question that follow:

Alia, Karan and Shilpa were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Goodwill appeared in their books at the value of ₹ 60,000. Karan decided to retire from the firm. On the date of his retirement, goodwill of the firm was valued at ₹ 2,40,000. The new profit sharing ratio decided among Alia and Shilpa was 2 : 3. Give the answer to the question given below:

How much will be transferred to Karan's Capital Account of the existing goodwill?


Analyse the case given below and answer the question that follow:

Alia, Karan and Shilpa were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Goodwill appeared in their books at the value of ₹ 60,000. Karan decided to retire from the firm. On the date of his retirement, goodwill of the firm was valued at ₹ 2,40,000. The new profit sharing ratio decided among Alia and Shilpa was 2 : 3. Give the answer to the question given below:

What amount of goodwill will be transferred to Karan's Capital account?


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


Govind, Hari and Pratap are partners. On the retirement of Govind, the goodwill already appears on the Balance Sheet at ₹24,000. The goodwill will be written off ______


Identify the formula for calculating goodwill with the help of capitalised method of super profit.


Profit for 2015, 2016 & 2017 is ₹ 10,000, ₹ 15,000 & ₹ 25,000. Calculate average profit.


Fill in the blank.

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


A and B were partners in a firm sharing profits equally. Their capitals were : A ₹ 1,20,000 and B ₹ 80,000. The annual rate of interest is 20%. The profits of the firm for the last three years were ₹ 34,000; ₹ 38,000 and ₹ 30,000. They admitted C as a new partner. On C's admission the goodwill of the firm was valued at 2 years purchase of the super profits.

Calculate the value of goodwill of the firm on C's admission. 


Manas and Mili are partners in a firm sharing profits in the ratio of 3 : 2. Anita is admitted as a new partner for `1/4`th share in future profits. Capitals of Manas and Mili were ₹ 3,00,000 and ₹ 1,50,000 respectively. Anita brought ₹  2,00,000 as her capital. The value of goodwill of the firm on Anita's admission.


Calculate goodwill of a firm on the basis of three years purchases of the Weighted Average Profits of the last four years. The profits of the last four years were: 

Years (ending 31st march) 2020 2021 2022 2023
Amount 28,000 27,000 46,900 53,810
  1. On 1st April, 2020 a major plant repair was undertaken for ₹ 10,000 which was charged to revenue. The said sum is to be capitalized for goodwill calculation subject to adjustment of depreciation of 10% on reducing balance method.
  2. For the purpose of calculating Goodwill the company decided that the years ending 31.03.2020 and 31.03.2021 be weighted as 1 each (being COVID affected) and for year ending 31.03.2022 and 31.03.2023 weights be taken as 2 and 3 respectively.

Complete the following Table:

? = `"Total Profit"/"Number of Years"`

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.


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.


______ = Average profit x No. of years of purchase


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:

  1. Unaccounted accrued income of ₹ 10,000 to be provided for.
  2. Bills Payable of ₹ 10,000 which were recorded, to be discharged at a rebate of 10%.
  3. Debtors of ₹ 2,000 to be irrecoverable.
  4. Provision for doubtful debts to be provided @ 2% of the debtors.

What is the net effect of revaluation of assets and liabilities?


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