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Question
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.
Solution
| JOURNAL ENTRY | ||||
| Date | Particulars | L.F. | Dr. Amount | Cr. Amount |
| Suresh’s Capital A/c Dr. | 23,760 | |||
| Tushar’s Capital A/c Dr | 15,840 | |||
|
Ramesh’s Capital A/c (Being goodwill adjusted) |
39,600 | |||
Working Note:
Ramesh’s share of Goodwill = ₹2,90,000 − ₹2,50,400
= ₹39,600
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| Years |
Profit Rs |
|
| I | 4,00,000 | |
| II | 4,80,000 | |
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| V | 2,20,000 |
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| Liabilities |
Amount Rs |
Assets |
Amount Rs |
|
Sundry Creditors General Reserve Capital Reserve Anant 30,000 Sampat 15,000 Gunvant 15,000 |
9,000 9,600
60,000 |
Bank Bills Receivables Stock Tools Furniture
|
15,600 18,000 18,000 3,000 24,000
|
| 78,600 | 78,600 |
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| Balance Sheet as at 31st March,2021 | |||||
| Liabilities | Amount (₹) | Assets | Amount (₹) | ||
| Sundry Creditors | 56,500 | Cash | 1,17,300 | ||
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______ = `("Total Profit")/("Number of Years")`
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| ? | = | `"Total Profit"/"Number of Years"` |
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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
