Question 15 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 15 Chapter 3 of +2-A

15. Raman and Daman are partners sharing profits in the ratio of 60 : 40 and for the last four years they have been getting annual salaries of 50,000 and 40,000 respectively. The annual accounts have shown the following net profit before charging partners’ salaries: Year ended 31st March, 2017 − 1,40,000; 2018 − 1,01,000 and 2019 − 1,30,000. On 1st April, 2019, Zeenu is admitted to the partnership for 1/4th share in profit without any salary. Goodwill is to be valued at four years’ purchase of weighted average profit of last three years after partners′ salaries; Profits to be weighted as 1 : 2 : 3, the greatest weight being given to the last year. Calculate the value of Goodwill.

The solution of Question 15 Chapter 3 of +2-A

:

 Year ProfitA Partners’RemunerationB Profit afterPartners’Remuneration(C = A * B) Weight D Product(E = C * D) 31st March, 2017 1,40,000 90,000 50,000 1 50,000 31st March, 2018 1,01,000 90,000 11,000 2 22,000 31st March, 2019 1,30,000 90,000 40,000 3 1,20,000 Total 6 1,92,000

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

 = 1,92,000 6 = 32,000

Number of years’ purchase = 4

 Goodwill = Weighted Average Profit X Number of years’ purchase Goodwill = 32,000 X 3 Goodwill = 1,28,000

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

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