Question 36 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 36 Chapter 5 of +2-A

Question 36 Chapter 5 of +2-A

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)

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 36 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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