Question 36 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 36 Chapter 3 of +2-A

36. Ayub and Amit are partners in a firm and they admit Jaspal into partnership w.e.f. 1st April 2019. They agreed to value goodwill at 3 years’ purchase of Super Profit Method for which they decided to average profit of the last 5 years. The profits for the last 5 years were:

 Year Ended Net Profit 31st March 2015 1,50,000 31st March 2016 1,80,000 31st March, 2017 1,00,000 Including abnormal loss of 1,00,000 31st March, 2018 2,60,000 Including abnormal gain (profit of 40,000) 31st March, 2019 2,40,000

The solution of Question 36 Chapter 3 of +2-A

:

 Year Profit/lossesA AdjustmentB Actual Profit(C = A – B) 31 March, 2015 1,50,000 – 1,50,000 31 March, 2016 1,80,000 – 1,80,000 31 March, 2017 1,00,000 + 1,00,000 2,00,000 31 March, 2017 2,60,000 – 40,000 2,20,000 31 March 2017 2,40,000 – 2,40,000 Total 9,90,000

 Super Profit = Actual average Profit- Normal Profit Actual average Profit = Total Profit for past given years = Number of years = 9,90,000 5 = 1,98,000

 Normal Profit = Capital Employed X Normal Rate of Return 100
 = 15,00,000 X 10 100 = 1,50,000

 Capital Employed = 20,00,000 – 5,00,000 = 15,00,000 Super Profit = Actual Profit – Normal Profit = 1,98,000 – 1,50,000 = 48,000

Number of years’ purchase = 3

 Goodwill = Super Profit X number of years’ purchase Goodwill = 48,000 x 3 Goodwill = 1,44,000

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)

• 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