Question 36 Chapter 5 of +2-A
Table of Contents
36. On the admission of Rao, the goodwill of Murty and Shah is valued at 30,000. Rao is to get 1/4th share of profits. Previously Murty and Shah shared profits in the ratio of 3: 2. Rao is unable to bring the amount of goodwill. Give Journal entries in the books of Murty and Shah when:
(a) there is no Goodwill Account and
(b) Goodwill appears in the books at 10,000.
The solution of Question 36 Chapter 5 of +2-A: –
Case A: -Where there is no goodwill account
| Date | Particulars |
L.F. | Debit | Credit | |
| Rao’s Capital A/c | Dr | 7,500 | |||
| To Murty’s Capital A/c | 4,500 | ||||
| To Shah’s Capital A/c | 3,000 | ||||
| (Being C’s share of goodwill adjusted with his capital account ) | |||||
Working Note: –
Firm’s Share of Goodwill = 30,000
| C’s Share of Goodwill | = | Firm’s Goodwill x | C’s share |
| = | 30,000 | X | 1 | |
| 4 | ||||
| = | 7,500 |
Sacrificing Ratio of Murty and Shah = 3:2
| Murty will get a share of Goodwill | = | C’s Goodwill x | Sacrifice share of Murty |
| = | 7,500 | X | 3 | |
| 5 | ||||
| = | 4,500 |
| Shah will get a share of Goodwill | = | C’s Goodwill x | Sacrifice share of Shah |
| = | 7,500 | X | 2 | |
| 5 | ||||
| = | 3,000 |
| Date | Particulars |
L.F. | Debit | Credit | |
| Murty’s Capital A/c | Dr. | 6,000 | |||
| Shah’s Capital A/c | Dr. | 4,000 | |||
| To Premium for Goodwill A/c | 10,000 | ||||
| (Being goodwill written off which is already in the books) | |||||
| Rao’s Capital A/c | Dr | 7,500 | |||
| To Murty’s Capital A/c | 4,500 | ||||
| To Shah’s Capital A/c | 3,000 | ||||
| (Being C’s share of goodwill adjusted with his capital account ) | |||||
Working Note: –
Goodwill in the books = 10,000
| Murty will get a share of Goodwill | = | 10,000 | X | 3 |
| 5 | ||||
| = | 6,000 |
| Shah will get a share of Goodwill | = | 10,000 | X | 2 |
| 5 | ||||
| = | 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)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
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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