Q.No.39 | Chapter 5 – Admission of Partner | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Question 39 Chapter 5 of +2-A

39. Mohan and Sohan were partners in a firm sharing profits and losses in the ratio of 3 : 2. They admitted Ram for 1/4th share on 1st April, 2019. It was agreed that goodwill of the firm will be valued at 3 years' purchase of the average profit of last 4 years ended 31st March, were 50,000 for 2015-16, 60,000 for 2016-17, 90,000 for 2017-18 and 70,000 for 2018-19. Ram did not bring his share of goodwill premium in cash. Record the necessary Journal entries in the books of the firm on Ram's admission when:
(a) Goodwill appears in the books at 2,02,500.
(b) Goodwill appears in the books at 2,500.
(c) Goodwill appears in the books at 2,05,000.

The solution of Question 39 Chapter 5 of +2-A: -

(a) Goodwill appears in the books at 2,02,500.

Date	Particulars		L.F.	Debit	Credit
	Mohan’s Capital A/c	Dr		1,21,500
	Sohan’s Capital A/c	Dr		81,000
	To Goodwill A/c				2,02,500
	(Being goodwill written off which is already in the books)
	Ram's Capital A/c	Dr		50,625
	To Mohan’s Capital A/c				30,375
	To Sohan’s Capital A/c				20,250
	(Being Ram's share of goodwill adjusted with his capital account)

 

(b) Goodwill appears in the books at 2,500.

Date	Particulars		L.F.	Debit	Credit
	Mohan’s Capital A/c	Dr		1,500
	Sohan’s Capital A/c	Dr		1,000
	To Goodwill A/c				2,500
	(Being goodwill written off which is already in the books)
	Ram's Capital A/c	Dr		50,625
	To Mohan’s Capital A/c				30,375
	To Sohan’s Capital A/c				20,250
	(Being Ram's share of goodwill adjusted with his capital account)

 

(c) Goodwill appears in the books at 2,05,000.

Date	Particulars		L.F.	Debit	Credit
	Mohan’s Capital A/c	Dr		1,23,000
	Sohan’s Capital A/c	Dr		82,000
	To Goodwill A/c				2,05,000
	(Being goodwill written off which is already in the books)
	Ram's Capital A/c	Dr		50,625
	To Mohan’s Capital A/c				30,375
	To Sohan’s Capital A/c				20,250
	(Being Ram's share of goodwill adjusted with his capital account)

 

Working Note: -

 

Average Profit	=	Total Profit for past given years
		Number of years

=	50,000 + 60,000 + 90,000 + 70,000
	4

=	2,70,000
	4
=	67,500

Number of years’ purchase = 3

Goodwill	=	Average Profit X	Number of years’ purchase
	=	67,500 X	3
	=	2,02,500

 

Ram’s Share of Goodwill

=

Firm’s Goodwill  X

Share of E’s

=	2,02,500	X	1
			4
=	50,625

Sacrificing Ratio of Mohan and Sohan = 3 : 2

Mohan will get Share of Goodwill

=

Ram’s Goodwill  X

Sacrifice share of A

=	50,625	X	1
			12
	=	45,000

 

A will get Share of Goodwill	=	C’s, D’s & E’s Goodwill  X	Sacrifice share of A

=	50,625	X	3
			5
	=	30,375

 

Sohan will get Share of Goodwill

=

Ram’s Goodwill  X

Sacrifice share of A

=	1,71,000	X	2
			5
=	20,250

 

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