Question 27 Chapter 5 of +2-A
27. X and Y are partners sharing profits in the ratio of 3 : 1. Z is admitted as a partner for which he pays 30,000 for godwill in cash. X, Y and Z decide to share the future profits in equal proportion. You are required to pass a single Journal entry to give effect to the above arrangement.
The solution of Question 27 Chapter 6 of +2-A
| Date | Particulars |
L.F. | Debit | Credit | |
| Cash A/c | Dr | 30,000 | |||
| To Premium for Goodwill A/c | 30,000 | ||||
| (Being C brought his share of goodwill) | |||||
| Premium for Goodwill A/c | Dr | 30,000 | |||
| Y’s Capital A/c | Dr | 7,500 | |||
| To X’s Capital A/c | 37,500 | ||||
| (Being Y and Z share of gain in goodwill transferred to X’s Capital Account |
|||||
Working Note: –
| Old Ratio of X and Y | = | 3 : 1 |
| New Ratio of X, Y, and Z | = | 1 : 1 : 1 |
Sacrificing Share = Old Ratio – New Ratio
| X’s Sacrificing Share | = | 3 | – | 1 |
| 4 | 3 |
| = | 9 – 4 | |
| 12 |
| = | 5 | Sacrifice |
|
| 12 |
| Y’s Sacrificing Share | = | 1 | – | 1 |
| 4 | 3 |
| = | 3 – 4 | |
| 12 |
| = | (-1) | Gains | |
| 12 |
Distribution of Z’s share of Goodwill
Z’s share of Goodwill = 30,000
X’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 | = | 30,000 | X | 3 |
| 1 | ||||
| = | 90,000 |
Y’s Share of Goodwill = Firm’s Goodwill X Gaining share of C’s
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| Y’s Share of Goodwill | = | 90,000 | X | 1 |
| 12 | ||||
| = | 7,500 |
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. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
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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