# Question 07 Chapter 4 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 07 Chapter 4 of +2-A

7. Mandeep, Vinod and Abbas are partners sharing profits and losses in the ratio of 3: 2: 1. From 1st April 2019, they decided to share profits equally. The Partnership Deed provides that
in the event of any change in profit-sharing ratio, goodwill shall be valued at three years’ purchase of the average profit of the last five years. The profits and losses of the past five years are:
Profit − Year ended 31st March, 2015 − 1,00,000; 2016 − 1,50,000; 2018 − 2,00,000; 2019 − 2,00,000.
Loss − Year ended 31st March 2017 − 50,000.
Pass the Journal entry showing the working.

The solution of Question 07 Chapter 4 of +2-A

 Old Ratio of Mandeep, Vinod, & Abbas = 3: 2: 1 New Ratio of Mandeep, Vinod, & Abbas = 1: 1: 1

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

 Mandeep’s Sacrificing/Gaining share = 3 – 1 6 3
 = 3 – 2 6
 = 1 (Sacrificing) 6
 Vinod’s Share Sacrificing/Gaining = 2 – 1 6 3
 = 2 – 2 6
 = Nil
 Mandeep’s Sacrificing/Gaining share = 1 – 1 6 3
 = 1 -2 6
 = – 1 Gaining 6

Calculation of Goodwill: –

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

 Average Profit = 1,00,000 + 1,50,000 + 2,00,000 + 2,00,000 + (-)50,000 5

 Average Profit = 6,00,000 5 = 1,20,000

Number of years’ purchase = 3

 Goodwill = Average Profit x Number of years’ purchase = 1,20,000 x 3 = 3,60,000

Adjustment of Goodwill: –

 Amount of Goodwill Credited to Mandeep’s Capital = 3,60,000 X 1 6 = 60,000

 Amount of Goodwill debited to Abbas’s Capital = 3,60,000 X 1 6 = 60,000

 In the Books of _______________ Date Particulars L.F. Debit Credit 2019 April 1 Abbas’s Capital A/c Dr 60,000 To Mandeep’s Capital A/c 60,000 (Being amount of goodwill adjusted through a capital account)

### 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

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