Question 14 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Q-14 - CH-6 - T.S. Grewal +2 Book 2019 - Solution-min

Question 14 Chapter 6 of +2-A

14. P, Q, R, and S were partners in firm sharing profits in the ratio of 5 : 3 : 1: 1. On 1st January 2019, S retired from the firm. On S’s retirement, the goodwill of the firm was valued at 4,20,000.
The new profit-sharing ratio among P, Q, and R will be 4 : 3 : 3.
Showing your working notes clearly, pass necessary journal entry for the treatment of goodwill in the books of the firm on S’s retirement.

The solution of Question 14 Chapter 6 of +2-A: –

 

Date Particulars
L.F. Debit Credit
  R’s Capital A/c Dr   84,000  
  To P’s Capital A/c       42,000
  To S’s Capital A/c       42,000
  (Being share of R’s goodwill adjusted)      

Working Note: –

Old Ratio of P, Q, R, and S = 5: 3: 1: 1
S retires from the firm

New Ratio of P, Q, and R = 4: 3: 3

Calculation of Gaining Ratio: –

Gaining Ratio = New Ratio – Old Ratio

P’s Sacrificing Share = 4 5
10 10
         
  = 4 5
  10
         
  = 1    
  10    

 

Q’s Gaining Share = 3 3
10 10
         
  = 3 3
  10
         
  = Nil    
       

 

R’s Gaining Share = 3 1
10 10
         
  = 3 1
  10
         
  = 2    
  10    

 

Firm’s Share of Goodwill =  4,20,000

P’s Share of Goodwill =  Firm’s Goodwill X P’s Sacrificing Shares

P’s Share of Goodwill = 4,20,000 X 1
10
         
  = 42,000    

R’s Share of Goodwill =  Firm’s Goodwill X R’s Gaining Shares

R’s Share of Goodwill = 4,20,000 X 2
10
         
  = 84,000

 

S’s Share of Goodwill =  Firm’s Goodwill X S’s Sacrificing Shares

S’s Share of Goodwill = 4,20,000 X 1
10
         
  = 42,000    

 

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)

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

 

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2 Book 1 min - Question 14 Chapter 6 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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