Question 26 Chapter 5 of +2 Part-1 – USHA Publication 12 Class Part – 1

Question 26 Chapter 5 of +2- Part-

Question 26 Chapter 5 of +2-Part-1

26.( Different cases of goodwill) A and B shared profits in the proportion of 3 and 2 had capitals of Rs. 20,000 and Rs. 15,000 respectively. They agree tp admit C into partnership on the following terms for a third share in the future profits :

  1. That C should bring in Rs. 20,000 as capital.
  2. That as C is unable to bring his share of goodwill in cash the goodwill of the firm be valued at Rs. 15,000. set out the journal entries required , the capital accounts of partners. State the future profit sharing proportion of the partners.

The solution of Question 26 Chapter 5 of +2 Part-1: – 

Journal
Date Particulars
L.F. Debit Credit
2019          
i) Cash A/c Dr.   20,000  
  To Goodwill A/c       20,000
  (Being existing goodwill written off . )      
         
ii) C’s current A/c Dr.   5,000  
  To A’s Capital A/c       3,000
  To B’s Capital A/c       2,000
  (Being C’s share in goodwill adjusted in 3:2)        
         

NOTE: Goodwill not brought in cash is adjusted through the current account of new partner due to provisions of AS-26

Profit and Loss Account A/c
Particulars
A B C Particulars
A B C
To A’s capital A/c     3,000 To Balance b/d 20,000 15,000  
To B’s Capital A/c     2,000 To Cash A/c     20,000
        To C’s capital A/c 3,000 2,000  
To Balance c/d 23,000 17,000 15,000        
  23,000 17,000 15,000   23,000
17,000 15,000

Calculation of new profit sharing ratio 

Let total profit of the firm = Re.1

Share of profit acquired by C = 1
3
Remaining share = 1 1
3
         
  = 2    
  3    
A’s New share = 3 x 2
5 3
         
  = 6    
  15    
B’s New share = 2 x 2
5 3
         
  = 4    
  15    
 C’s share = 1 or 5
3 15
New Ratio = 6 : 4 : 5
15 15 15
             
  = 6 : 4 : 5

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Also, Check out the solved question of previous Chapters: –

Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution

Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution

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2 Book 1 min - Question 26 Chapter 5 of +2 Part-1 - USHA Publication 12 Class Part - 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firm

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