Question 29 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 29 Chapter 5 of +2-A

Question 29 Chapter 5 of +2-A

29. A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. They admit C into partnership for 1/5th share. C brings 30,000 as capital and 10,000 as goodwill. At the time of admission of C, goodwill appeared in the Balance Sheet of A and B at 3,000. New profit-sharing ratio of the partners will be 5 : 3 : 2. Pass necessary Journal entries.

 

The solution of Question 29 Chapter 6 of +2-A

Date Particulars
L.F. Debit Credit
  A’s Capital A/c Dr   1,800  
  B’s Capital A/c Dr   1,200  
  To Goodwill A/c       3,000
  (Being goodwill written off which is already in the books)        
  Bank A/c Dr   40,000  
  To C’s Capital A/c       30,000
  To Premium for Goodwill A/c       10,000
  (Being C brought his share of capital and goodwill)        
  Premium for Goodwill A/c Dr   10,000  
  To A’s Capital A/c       5,000
  To B’s Capital A/c       5,000
  (Being goodwill distributed among the old partners’ in their sacrificing ratio)        

 

Old Ratio of A and B = 3 : 2
New Ratio of A, B, and C = 5 : 3 : 2

Sacrificing Share = Old Ratio – New Ratio

A’s Sacrificing Share = 3 5
5 10
  = 6 – 5
10
  = 1 Sacrifice
  10

 

B’s Sacrificing Share = 2 3
5 10
  = 4 – 3
10
  = (-1) Gains
  10

 

Total Firm’s Goodwill = 3,000
A’s share of Goodwill = 3,000 X 3
5
  = 1,800
   

 

B’s share of Goodwill = 3,000 X 2
5
  = 1,200
   

Sacrifice Ratio = 1 : 1
Distribution of C’s share of Goodwill
Share of Goodwill = C’s Goodwill  X Partners’ Sacrifice share

A’s and B’s Share of Goodwill = 10,000 X 1
2
  = 5,000
   

 

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 29 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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