Question 23 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 23 Chapter 5 of +2-A

Question 23 Chapter 5 of +2-A

23. B and C are in partnership sharing profits and losses as 3 : 1. They admit D into the firm, D pays premium of 15,000 for 1/3rd share of the profits. As between themselves, B and C agree to share future profits and losses equally. Draft Journal entries showing appropriations of the premium money.

 

The solution of Question 23 Chapter 6 of +2-A

 

Date Particulars
L.F. Debit Credit
  Cash A/c Dr   15,000  
  To Premium for Goodwill A/c       15,000
  (Being C brought his share of goodwill)        
  Premium for Goodwill A/c Dr   15,000  
  C’s Capital A/c Dr   15,000  
  To B’s Capital A/c       18,750
  (Being goodwill distributed among the old partners’ in their sacrificing ratio)        

 

Old Ratio of B and C = 3 : 1
D is admitted for 1/3th share of profit    

Let the total share of the business = 1
Remaining share of B and C after D’s Admission = Total Share – D’s Share

Remaining share = 1 1
3
  = 3 – 1
3
  = 2
  3

 

B and C each share of profit after D’s admission = 2 X 1
3 2
  = 1
  3
Old Ratio of B and C = 3 : 1
New Ratio of B, C, and D = 1 : 1 : 1 

Sacrificing Share = Old Ratio – New Ratio

B’s Sacrificing Share = 3 1
4 3
  = 9 – 4
12
  = 5 Sacrifice
  12

 

C’s Sacrificing Share = 1 1
4 3
  = 3 – 4
12
  = (-1) Gains
  12

 

Distribution of D’s share of Goodwill
D’s share of Goodwill = 15,000
C’s gaining the share in the firm’s profit so only B will received the share of goodwill brought by D and he will also receive the share of goodwill from C

Total Firm’s Goodwill = 15,000 X 3
1
  = 45,000    

 

C’s Share of Goodwill = Firm’s Goodwill  X Gaining share of C’s
B’s get share of Goodwill = 45,000 X 1
12
  = 3,750
   

 


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 23 Chapter 5 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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