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Question 16 Chapter 4 of +2-Part-1
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16. (Comprehensive Illustration) X and Y are in partnership, sharing profits in 2:3 ratio. With effect from 1st April 2019, they agreed to share profits in the ratio of 1:2. For this purpose, the goodwill of the firm is to be valued at two years purchase of the average profits of the last three years, which were Rs.75,000, Rs.80,000 and Rs.1,00,000 respectively. The reserve appears in the books at Rs.55,000. Partners neither want to show the goodwill in the books nor want to distribute the reserve. You are required to give effect to the change by passing a single journal entry.
The solution of Question 16 Chapter 4 of +2 Part-1: –
| Journal | |||||
| Date | Particulars | L.F. | Debit | Credit | |
| 2019 | |||||
| April 1 | Y’s Capital A/c | Dr. | 15,000 | ||
| To X’s Capital A/c | 15,000 | ||||
| (Being capitals adjusted on account of change in profit ratio) | |||||
Working Notes: –
| Average Profit | = | Total Profit for past given years |
| Number of years | ||
| = | 75,000 + 80,000+ 1,00,000 | |
| 3 | ||
| = | 2,55,000 | |
| 3 | ||
| = | 85,000 |
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| Number of years’ purchase | = | 2 |
| Goodwill | = | Average Profit X Number of years’ purchase |
| Goodwill | = | 85,000X 2 |
| Goodwill | = | 1,70,000 |
Old Ratio = 2 : 3
New Ratio = 1 : 2
Calculate the Sacrificing or Gaining Ratio of Partners
Sacrificing or Gaining Ratio = Old ratio – New ratio
| X’s Share Sacrificing/Gaining | = | 2 | – | 1 |
| 5 | 3 |
| = | 6- 5 | |
| 15 |
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| = | 1 | (Sacrifice) | |
| 15 |
| Y’s Share Sacrificing/Gaining | = | 3 | – | 2 |
| 5 | 3 |
| = | 9 – 10 | |
| 15 |
| = | -1 | (Gain) | |
| 15 |
| Calculation of net adjustment in the partner’s capital accounts: | ||
| Particulars | A | B |
| On account of goodwill (Rs.1,70,000*1/15) | (Cr.)11,333 | (Dr.)11,333 |
| On account of Reserve (Rs.55,000*1/15) | (Cr.) 3,667 | (Dr.) 3,667 |
| Adjustment | (Cr.)15,000 | (Dr.)15,000 |
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End of Solution
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Chapter-Wise Solution of Usha Publication Accountancy – Part 1 Class 12 – Session 2024-25 as per the PSEB curriculum
Check out Solutions to all questions of the every chapter shown as under. The Solution of Accountancy – Part 1 Class 12 – Session 2024-25 is provided as per the new book published by Usha Publication.
Chapter No. 1 – Accounting Not-for-Profit Organisations (Deleted from the Syllabus)
Chapter No. 2 – Partnership Accounts – I (Introduction)
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Chapter No. 3 – Partnership Accounts – II (Goodwill: Nature and Valuation)
Chapter No. 4 – Partnership Accounts – III (Reconstitution of Partnership)
Chapter No. 5 – Partnership Accounts – IV (Admission of A Partner)
Chapter No. 6 – Partnership Accounts – V (Retirement and Death of A Partner)
Chapter No. 7 – Partnership Accounts – VI (Dissolution of Partnership Firm)
Also, Check out our Comprehensive Chapter-wise solution of Advanced Accountancy Part 1 Class 12 by Unimax Publication
- Chapter No. 1 – Accounts of Non-Profit Organisations (Deleted from the Syllabus)
- Chapter No. 2 – Partnership Accounts – I (Basic Concepts)
- Chapter No. 3 – Partnership Accounts – II (Goodwill)
- Chapter No. 4 – Partnership Accounts – III (Change in Profit Sharing Ratio among Existing Partners)
- Chapter No. 5 – Partnership Accounts – IV (Admission of A Partner)
- Chapter No. 6 – Partnership Accounts – V (Retirement and Death of A Partner)
- Chapter No. 7 – Partnership Accounts – VI (Dissolution of Partnership Firm)
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1. Accountancy – Part 2 Class 12 – Session 2024-25 By Usha Publication
2. Advanced Accountancy Part 2 Class 12 by Unimax Publication
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