# Question 05 Chapter 4 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 05 Chapter 4 of +2-A

5. A, B and C shared profits and losses in the ratio of 3 : 2 : 1 respectively. With effect from 1st April, 2019, they agreed to share profits equally. The goodwill of the firm was valued at 18,000. Pass necessary Journal entries when: (a) Goodwill is adjusted through Partners’ Capital Accounts; and (b) Goodwill is raised and written off.

The solution of Question 05 Chapter 4 of +2-A

:

 Old Ratio of X, Y, & Z = 3 : 2 : 1 New Ratio of X, Y, & Z = 1 : 1 : 1

Calculate the Sacrificing or Gaining Ratio of Partners
Sacrificing or Gaining Ratio = Old Ratio – New Ratio

 X’s Share Sacrificing/Gaining = 3 – 1 6 3
 = 3 – 2 6
 = 1 Sacrificing 6
 Y’s Share Sacrificing/Gaining = 2 – 1 6 3
 = 2 – 2 6 = Nil

 Z’s Share Sacrificing/Gaining = 1 – 1 6 3
 = 1 -2 6
 = -1 Gaining 6

Case (a)

 Amount of Goodwill for Adjustment = 18,000 X 1 6 = 3,000

 In the Books of _______________ Date Particulars L.F. Debit Credit 2019 April 1 C’s Capital A/c Dr 3,000 To A’s Capital A/c 3,000 (Being amount of goodwill adjusted through capital account)

Case (B)

 In the Books of _______________ Date Particulars L.F. Debit Credit 2019 April 1 Goodwill A/c Dr 18,000 To A’s Capital A/c 9,000 To B’s Capital A/c 9,000 To C’s Capital A/c 9,000 (Being amount of goodwill raised in the books in the old ratio) April 1 A’s Capital A/c Dr 6,000 B’s Capital A/c Dr 6,000 C’s Capital A/c Dr 6,000 To Goodwill A/c 18,000 (Being amount of goodwill written off in the new profit sharing ratio)

### 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. 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