Question 09 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 09 Chapter 3 of +2-A

9. Bharat and Bhushan are partners sharing profits in the ratio of 3: 2. They decided to admit

1. Manu as a partner from 1st April 2019 on the following terms:
2. Manu will be given 2/5th share of the profit.
Goodwill of the firm will be valued at two years’ purchase of three years’ normal average profit of the firm.
Profits of the previous three years ended 31st March, were:
2019 – Profit 30,000 after debiting loss of stock by fire 40, 000.
2018 – Loss 80,000 includes voluntary retirement compensation paid 1, 10, 000.
2017 – Profit 1,10,000 including again (profit of 30,000 on the sale of fixed assets).
Calculate the value of goodwill.

The solution of Question 09 Chapter 3 of +2-A

:

 Average Profit = Total Profit for past given years Number of years
 Average Profit = 80,000+30,000+70,000 3

 = 1,80,000 3 = 60,000

Number of years’ purchase = 2

 Goodwill = Average Profit X Number of years’ purchase Goodwill = 60,000 X 2 Goodwill = 1,20,000/-

Working Note: –

 Adjusted Profit for the year ended 31st March,2017 = Total Profit − Gain on sale of Fixed Assets = 1,10,000 – 30,000 = 80,000 Adjusted Profit for the year ended 31st March,2018 = Total Profit + Voluntary retirement Compensation paid = (-80,000) + 1,10,000 = 30,000 Adjusted Profit for the year ended 31st March,2019 = Total Profit + Loss by fire = 30,000 + 40, 000 = 70,000

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