Question 14 Chapter 4 - Unimax Class 12 Part 1 - 2021

Question 14 Chapter 4 - Unimax Class 12 Part 1

14. Aditi and Charvi are partner sharing Profits and Losses in the ratio of 3 : 1. The Capitals are Aditi Rs. 60000 and Charvi Rs. 20000. It has been decided that with effect from 1st January, 2021 Profit sharing ratio will be 5 : 3. The deed stated that goodwill is to be valued at 2 years purchase of average Profits of 3 years and Capitals of the two partners should be in their profit sharing ratio. The Profit for 20185, 2019 and 2020 were Rs. 22000, Rs. 25000 and Rs. 37000 respectively. Make necessary Journal entries. Show also the Capital Accounts of partners if Capitals of partners are to be adjusted in new Profit Sharing Ratio.

The solution of Question 14 Chapter 4 - Unimax Class 12 Part 1

Journal

Date	Particulars		L.F.	Debit	Credit
	Charvi’s Capital a/c	Dr.		7000
	To Aditi’s Capital a/c				7000
	(Being adjustment entry passed for share of goodwill on change in constitution)
	Aditi’s Capital a/c	Dr.		17000
	To Bank a/c				17000
	(Being excess capital refunded to Aditi)
	Bank a/c	Dr.		17000
	To Charvi’s Capital A/c				17000
	(Being additional capital brought in by Charvi)

  Capital Accounts

Particulars	Aditi	Charvi	Particulars	Aditi	Charvi
To Aditi’s Capital A/c (Share of goodwill)	-	7000	By Balance b/d	60000	20000
To Bank a/c	17000	-	By Charvi’s Capital a/c (Share of goodwill)	7000	-
To Balance c/d	50000	30000	By Bank a/c	-	17000
	67000	37000		67000	37000

Working Note :
Calculation of Sacrifice/Gain

	Old Share	New Share	Difference
Aditi	3/4	5/8	1/8 (Sacrifice)
Charvi	1/4	3/8	1/8 (Gain)

2. Calculation of Goodwill
Total Profits = Rs. 22000 + Rs. 25000 + Rs. 37000
                    = Rs. 84000
Average Profits = Rs. 84000/3 = Rs. 28000
Goodwill = Rs. 28000 X 2 = Rs. 56000
Charvi will pay to Aditi 1/8th share of goodwill
Sacrificed by Aditi in favour of Charvi, on change in constitution
i.E 56000 X 1/8 = Rs. 7000
3. Calculation of New Capitals of Partners
Total capital of Aditi & Charvi = Rs. 60000 + Rs. 20000 = Rs. 80000
New Profit Sharing Ratio : 5 : 3
Aditi’s New Capital : Rs. 80000 X 5/8 = Rs. 50000
Charvi’s New Capital : Rs. 80000 X 3/8 = Rs. 30000

 

https://tutorstips.com/what-is-partnership/

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

• Chapter No. 1 - Financial Statement of Not-For-Profit Organisations
• Chapter No. 2 - Accounting for Partnership Firms - Fundamentals
• Chapter No. 3 - Goodwill: Nature and Valuation
• Chapter No. 4 - Change in Profit-Sharing Ratio Among the Existing Partners
• Chapter No. 5 - Admission of a Partner
• Chapter No. 6 - Retirement/Death of a Partner
• Chapter No. 7 - Dissolution of a Partnership Firm

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 8 - Company Accounts -  Accounting for Share Capital
• Chapter No. 9 - Company Accounts - Issue of Debentures
• Chapter No. 10 - Redemption of Debentures

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 1 - Financial Statements of a Company
• Chapter No. 2 - Financial Statement Analysis 
• Chapter No. 3 - Tools of Financial Statement Analysis - Comparative Statements and Common- Size Statements
• Chapter No. 4 - Accounting Ratios
• Chapter No. 5 - Cash Flow Statement

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication