Question 20 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 20 Chapter 6 of +2-A

Question 20 Chapter 6 of +2-A

20. M, N and O are partners in firm sharing profits in the ratio of 3: 2: 1. Goodwill has been valued at 60,000. On N’s retirement, M and O agree to share profits equally. Pass the necessary journal entry for treatment of N’s share of goodwill.

The solution of Question 20 Chapter 6 of +2-A: –

 

Date Particulars
L.F. Debit Credit
  O’s Capital A/c Dr   20,000  
  To N’s Capital A/c       20,000
  (Being Adjustment of B′s share of goodwill)      
           
           

Working Note: –

i. Calculation of B’s share of goodwill

M :N :O = 3:2:1(Old ratio)
M :O =1:1(New ratio)

ii Gaining Ratio

 

M’s Gain = 1 3
2 6
         
  = 3 3
  6
         
  = 0    
  6    

 

O’s Gain = 1 1
2 6
         
  = 3 1
  6
         
  = 2    
  6    

M:O = 0: 2

Calculation of Retiring Partner’s Share of Goodwill

N’s share of goodwill = 60,000 X 2
6
         
  = Rs 20,000    

N’s share of goodwill will be brought by O only
Therefore, O’s Capital A/c will be debited with Rs 20,000

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 20 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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