# Question 14 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 14 Chapter 3 of +2-A

14. A and B are partners sharing profits and losses in the ratio of 5 : 3. On 1st April 2019, C is admitted to the partnership for 1/4th share of profits. For this purpose, goodwill is to be valued at two years’ purchase of the last three years’ profits after allowing partners’ remuneration. Profits to be weighted 1: 2 : 3, the greatest weight being given to last year. Net profit before partners’ remuneration were: 2016-17 : 2,00,000; 2017-18 : 2,30,000; 2018-19 : 2,50,000. The remuneration of the partners is estimated to be 90,000 p.a. Calculate the amount of goodwill.

The solution of Question 14 Chapter 3 of +2-A

:

 Year ProfitA Partners’RemunerationB Profit afterPartners’Remuneration(C = A * B) Weight D Product(E = C * D) 2016-17 2,00,000 90,000 1,10,000 1 1,10,000 2017-18 2,30,000 90,000 1,40,000 2 2,80,000 2018-19 2,50,000 90,000 1,60,000 3 4,80,000 Total 6 8,70,000

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

 = 8,70,000 6 = 1,45,000

Number of years’ purchase = 3

 Goodwill = Average Profit X Number of years’ purchase Goodwill = 1,45,000 X 3 Goodwill = 2,90,000

### 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