Question 14 Chapter 4 – Unimax Class 12 Part 1 – 2021

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 Types

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)