Question 32 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 32 Chapter 5 of +2-A

Question 32 Chapter 5 of +2-A

32. A and B are partners in a business sharing profits and losses in the ratio of 1/3rd and 2/3rd.  On 1st April, 2019, their capitals were 8,000 and 10,000 respectively. On that date, they admit C in partnership and give him 1/4th share in the future profits. C brings 8,000 as his capital and 6,000 as goodwill. The amount of goodwill is withdrawn by the old partners in cash. Draft the journal entries and show the Capital Accounts of all the Partners. Calculate proportion in which partners would share profits and losses in future.

 

The solution of Question 32 Chapter 6 of +2-A

Date Particulars
L.F. Debit Credit
  Cash A/c Dr   14,000  
  To C’s capital A/c       8,000
  To Premium for Goodwill A/c       6,000
  (Being C brought his share of capital and goodwill)        
  Premium for Goodwill A/c Dr   6,000  
  To A’s Capital A/c       2,000
  To B’s Capital A/c       4,000
  (Being goodwill brought by C distributed among the old partners)        
  A’s Capital A/c Dr   2,000  
  B’s Capital A/c Dr   4,000  
  To Cash A/c       6,000
  (Being Amount of goodwill withdrawn by A and B)        

 

Particulars A
B C Particular A B C
To Cash A/c 2,000 4,000 By Balance B/d 8,000 10,000
        By Cash A/c 8,000
        By Premium for Goodwill A/c 2,000 4,000
               
        By Cash A/c (B. fig) 60,000
To Balance c/d *3 8,000 10,000 8,000        
  10,000 14,000 8,000   10,000 14,000 8,000

 

Working Note:-

Old Ratio of A and B = 1 : 2
C is admitted for 1/4th share of profit    

Let the total share of the business = 1
Remaining share of A and B after C’s Admission= Total Share – C’s Share

Remaining share = 1 1
4
  = 4 – 1
4
  = 3  
  4

To Calculate to New Ratio distribute the remaining share in the old ratio of old partners’
New Ratio = Combined share of A and B  X Old Ratio

A’s New Ratio = 3 X 1
4 3
  = 3  
  12

 

B’s New Ratio = 3 2
4 3
  = 6  
  12

 

C’s New Ratio = 1 3
4 3
  = 3  
  12

 

New Profit sharing Ratio between A ,B and C = 3 : 6 : 3
  = 1 : 2 : 1

 

C’s Share of Goodwill = 6,000
Sacrificing Ratio of X and Y = 3 : 2 sacrificing ratio is equal to old ratio because there no other condition for sacrificing old partners’ share. They will sacrifice in their old ratio

 

A will get Share of Goodwill = C’s Goodwill  x  Sacrifice share of A
  = 6,000 X 1
3
  = 2,000
   

 

B will get Share of Goodwill = C’s Goodwill  x  Sacrifice share of B
  = 6,000 X 2
3
  = 4,000
   

 

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

 

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

2 Book 1 min - Question 32 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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