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

Question 07 Chapter 4 of +2-A

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)

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

2 Book 1 min - Question 07 Chapter 4 of +2-A - T.S. Grewal 12 Class Part - A Vol. 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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