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Question
Write the term / word / phrase which can substitute the following statement :
The proportion in which the continuing partners benefit due to retirement of partner.
Solution
Gaining Ratio
Explanation: The proportion in which the continuing partners benefit due to retirement of a partner is called gaining ratio. It is calculated on the retirement or death of a partner for adjusting the retiring/deceased partner’s share of goodwill.
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RELATED QUESTIONS
Why are heirs of a retiring/deceased partner entitled to a share of goodwill of the firm?
Kavi, Ravi, Kumar and Guru were partners in the firm sharing profits in the ratio of 3:2:2:1. On 1.2.2017, Guru retired and the new profit sharing ratio decided between Kavi, Ravi and Kumar were 3:1:1. On Guru’s retirement, the goodwill of the firm was valued at Rs 3, 60,000. Showing your working notes clearly, pass necessary journal entry in the books of the firm for the treatment of goodwill on Guru’s retirement
Neetu, Meetu and Teetu were partners in a firm. On 1st January, 2018, Meetu retired. On Meetu's retirement the goodwill of the firm was valued at Rs 4,20,000.
Pass necessary journal entry for the treatment of goodwill on Meetu's retirement.
Write the word/term or phrase which can substitute the following statement.
Account which is debited when new partner brings cash for his share of goodwill.
Answer in one sentence only.
How would you adjust retiring partner’s share of goodwill without opening goodwill account?
Select the most appropriate answer from the alternatives given below :
If the goodwill is raised to the extent of retiring partners share ___________ account is to be debited.
State whether the following statements is true or false :
Retiring partner is entitled to his share of goodwill.
State whether the following statements is true or false :
If goodwill is written off retiring partner’s capital account is debited.
Complete the following sentence.
"If goodwill already appears in the books, it will be written off by debiting all partner's capital account in their ______ ratio"?
On retirement/death of a partner, the retiring/deceased partner's capital account will be credited with ______
Gobind, Hari and Pratap are partners. On the retirement of Gobind, the goodwill already appears on the Balance Sheet at Rs. 24,000. The goodwill will be written off ______
Which Accounting standard states that Goodwill, in general, is recorded in the books only when some consideration in money or money's worth has been paid for it?
According to AS-26 which goodwill is recorded in the books?
What journal entry will be recorded for writing off the goodwill already existing in Balance Sheet at the time of retirement of a partner?
How Goodwill is recorded on the retirement of a partner?
Madhu, Manav and Mukul were partners in a firm sharing profits in the ratio of 3 : 2: 1. On 31st March, 2021 Mukul retired from the firm. On Mukul's retirement, goodwill of the firm was valued at ₹ 3,00,000. Pass necessary journal entry for the treatment of goodwill without opening Goodwill Account on Mukul's retirement.
Puneet, Purav and Parth were partners in a firm sharing profits and losses in the ratio of 4 : 3 : 1. The firm closes its books on 31st March every year. As per the terms of partnership deed, on the death of any partner, the Goodwill of the firm will be calculated on the basis of 3 times the average profits of last 4 years. Puneet died on 1st July, 2021. The profits for last four years were:
| Year | Profit (₹) |
| 2017 - 18 | 90,000 |
| 2018 - 19 | 1,00,000 |
| 2019 - 20 | 1,30,000 |
| 2020 - 21 | 80,000 |
Puneet's share of profit up to the date of death was to be calculated on the basis of previous year's profit.
- Calculate goodwill of the firm and Puneet's share of goodwill.
- Calculate Puneet's share in the profits of the firm till the date of his death.
- Pass necessary journal entries for the treatment of goodwill without opening goodwill account and for Puneet's share of profit at the time of his death.
Meena, Beena and Veena were partners in a firm sharing profits & losses equally. Their balance sheet as on 31st March, 2022 was as follow:
| Balance Sheet of Meena, Beena and Veena as on 31st March, 2022 | |||||
| Liabilities | Amount (₹) | Amount (₹) | Assets | Amount (₹) | Amount (₹) |
| Capitals: | Plant and Machinery | 2,40,000 | |||
| Meena | 1,50,000 | 3,25,000 | Stock | 60,000 | |
| Beena | 1,00,000 | Sundry Debtors | 35,000 | ||
| Veena | 75,000 | Cash at Bank | 50,000 | ||
| General Reserve | 30,000 | ||||
| Sundry Creditors | 30,000 | ||||
| 3,85,000 | 3,85,000 | ||||
Veena died on 30th June,2022. According to the partnership deed, the executors of the deceased partner were entitled to:
- Balance in Capital account
- Salary till the date of death @ ₹ 25,000 p.a.
- Share of Goodwill calculated on the basis of twice the average profits of past three years.
- Share of profit from the closure of last accounting year till the date of death on the basis of average of three completed years' profits before death.
- Profits for 2019-20, 2020-21 and 2021-22 were ₹ 1,20,000, ₹ 90,000 and ₹ 1,50,000 respectively.
Veena withdrew ₹ 15,000 on 1st June, 2022 for paying her daughter's school fees.
Prepare Veena's capital account to be rendered to her executors.
