Question 29 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 29 Chapter 6 of +2-A

Question 29 Chapter 6 of +2-A

29. Partnership Deed of C and D, who are equal partners, has a clause that any partner may retire from the firm on the following terms by giving a six-month notice in writing: The retiring partner shall be paid−
the amount standing to the credit of his Capital Account and Current Account. b his share of profit to the date of retirement, calculated on the basis of the average profit of the three preceding completed years. c half the amount of the goodwill of the firm calculated at 1 1/2 times the average profit of the three preceding completed years. C gave a notice on 31st March 2017 to retire on 30th September 2017, when the balance of his Capital Account was 6,000 and his Current Account Dr. 500. Profits for the three preceding completed years ended 31st March, were: 2015 − 2,800; 2016 − 2,200 and 2017 − 1,600. What amount is due to C as per the partnership agreement?

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

 

C’s Capital Account
Particular
Amount Particular Amount
      By Balance b/d   6,000
To C’s Loan A/c   7,700 By C’s Current A/c   1,700
           
    7,700     7,700

 

C’s Current Account
Particular
Amount Particular Amount
To Balance b/d   500 By Profit and Loss Suspense A/c   550
To C’s Loan A/c   1,700 By D’s Current A/c   1,650
           
    2,200     2,200

 

Working Note:-

Calculation of Profit fromApril01, 2017toSept. 30, 2017

Average Profit = Profit of last 3 year
3
  = 2,800 + 2,200 + 1,600
3
  = Rs 2,200
C’s Profit (Share for 6 months) = Average Profit x C’s Share x 6
12
  = 2,200 X 1 X 6
  2 12
  = 550        

 

Calculation of Goodwill

Goodwill = Average Profit × 1.5
= 2,200 × 1.5 = Rs 3,300

C’s Share of Goodwill = 3,300 X 1
2
         
  = Rs 1,650    

 

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 6 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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