Question 29 Chapter 3 of Class 12 Part – 1
29. A, B and C are partners sharing profits and losses in the ratio of 5:3:2. From 1st April, 2018, they decided to share profits and losses equally. The partnership deed provides that in the event of any change in profit-sharing ratio, goodwill should be valued at two years’ purchase of the average profit of the previous 5 years. The profits and losses of the preceding five years are as follows:
| Year | Rs. |
| 31st March, 2014 (Loss) | 25,000 |
| 31st March, 2015 (Profit) | 70,000 |
| 31st March, 2016 (Profit) | 45,000 |
| 31st March, 2017 (Profit) | 90,000 |
| 31st March, 2018 (Profit) | 1,20,000 |
It is the practice of the firm not to show goodwill in the books. Give a journal entry to record the above change.
The solution of Question 29 Chapter 3 of Class 12 Part – 1: –
Journal Entry
| Date |
Particulars |
|
L . F | Dr. ₹ | Cr. ₹ |
| 2018 | B’s Capital A/c | Dr. | 4,000 | ||
| April 1 | C’s Capital A/c | Dr. | 16,000 | ||
| To A’s Capital A/c | 20,000 | ||||
| ( Being proportionate share of Goodwill adjusted among partners ) |
Working Notes:
| Average Profit | = | Total Profit |
| Total No. of Year |
| = | -25,000+70,000+45,000+90,000+1,20,0000 | |
| 5 |
= Rs. 60,000
Goodwill= Average Profit x Number of Years’ Purchase = 60,000 x 2 = Rs. 1,20,000
| Particulars |
P |
Q | R |
| Partners’ Old Ratio | 5/10 | 3/10 | 2/10 |
| Partners’ New Ratio | 1/3 | 1/3 | 1/3 |
| Difference | 5/30 | (-1)/30 | (-4)/30 |
| Net Effect | Sacrifice | Gain | Gain |
Thus Proportionate Share of Goodwill to be adjusted
| A= 1,20,000 | X | 5 |
| 30 |
= Rs. 20,000 (Cr.)
| B = 1,20,000 | X | 1 |
| 30 |
= Rs. 4,000 (Dr.)
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| C = 1,20,000 | X | 4 |
| 30 |
= Rs. 16,000(Dr.)
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Also, Check out the solved question of previous Chapters: –
Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution
- Chapter No. 1 – Accounting Not for Profit Organisations
- Chapter No. 2 – Partnership Accounts – I (Introduction)
- 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)
- Chapter No. 8 – Company Accounts (Share Capital)
- Chapter No. 9 – Company Accounts (Issue of Debentures)
- Chapter No. 10 – Company Accounts (Redemption of Debentures)
Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis- Comparative and Common Size
- Chapter No. 4 – Ratio Analysis
- Chapter No. 5 – Cash Flow Statement
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