Question 14 Chapter 4 – Unimax Class 12 Part 1
14. Aditi and Charvi are partner sharing Profits and Losses in the ratio of 3 : 1. The Capitals are Aditi Rs. 60000 and Charvi Rs. 20000. It has been decided that with effect from 1st January, 2021 Profit sharing ratio will be 5 : 3. The deed stated that goodwill is to be valued at 2 years purchase of average Profits of 3 years and Capitals of the two partners should be in their profit sharing ratio. The Profit for 20185, 2019 and 2020 were Rs. 22000, Rs. 25000 and Rs. 37000 respectively. Make necessary Journal entries. Show also the Capital Accounts of partners if Capitals of partners are to be adjusted in new Profit Sharing Ratio.
The solution of Question 14 Chapter 4 – Unimax Class 12 Part 1
Journal
| Date | Particulars | L.F. | Debit | Credit | |
| Chavi’s Capital a/c | Dr. | 7000 | |||
| To Aditi’s Capital a/c | 7000 | ||||
| (Being adjustment entry passed for share of goodwill on change in constitution) | |||||
| Aditi’s Capital a/c | Dr. | 17000 | |||
| To Bank a/c | 17000 | ||||
| (Being excess capital refunded to Aditi) | |||||
| Bank a/c | Dr. | 17000 | |||
| To Chavi’s Capital A/c | 17000 | ||||
| (Being additional capital brought in by Chavi) |
Capital Accounts
| Particulars | P | Q | Particulars | P | Q |
| To Aditi’s Capital A/c (Share of goodwill) | – | 7000 | By Balance b/d | 60000 | 20000 |
| To Bank a/c | 17000 | – | By Chavi’s Capital a/c (Share of goodwill) | 7000 | – |
| To Balance c/d | 50000 | 30000 | By Bank a/c | – | 17000 |
| 67000 | 37000 | 67000 | 37000 |
Working Note :
Calculation of Sacrifice/Gain
| Old Share | New Share | Difference | |
| Aditi | 3/4 | 5/8 | 1/8 (Sacrifice) |
| Chavi | 1/4 | 3/8 | 1/8 (Gain) |
2. Calculation of Goodwill
Total Profits = Rs. 22000 + Rs. 25000 + Rs. 37000
= Rs. 84000
Average Profits = Rs. 84000/3 = Rs. 28000
Goodwill = Rs. 28000 X 2 = Rs. 56000
Chavi will pay to Aditi 1/8th share of goodwill
Sacrificed by Aditi in favour of Chavi, on change in constitution
i.E 56000 X 1/8 = Rs. 7000
3. Calculation of New Capitals of Partners
Total capital of Aditi & Chavi = Rs. 60000 + Rs. 20000 = Rs. 80000
New Profit Sharing Ratio : 5 : 3
Aditi’s New Capital : Rs. 80000 X 5/8 = Rs. 50000
Chavi’s New Capital : Rs. 80000 X 3/8 = Rs. 30000
What is Partnership – Meaning and Its 4 Types
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. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
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
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