Question 40 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 40 Chapter 5 of +2-A

Question 40 Chapter 5 of +2-A

40. Madan and Gopal are partners sharing profits in the ratio of 3 : 2. They admit
Sooraj for 1/3rd share in profits on 1st April, 2019. They also decide to share future profits equally. Goodwill
of the firm was valued at 5,50,000. Goodwill existed in the books of account at 1,00,000, which the partners decide to carry forward.
Sooraj is unable to bring his share of goodwill. Pass the necessary Journal entries on admission of Sooraj, if:
(a) Goodwill is not to be raised and written off; and
(b) Goodwill is to be raised and written off.

The solution of Question 40 Chapter 5 of +2-A: –

(a) Goodwill is not to be raised and written off;

Date Particulars
L.F. Debit Credit
  Sooraj’s Capital A/c Dr   1,50,000  
  To Madan’s Capital A/c       1,20,000
  To Gopal’s Capital A/c       30,000
  (Being Sooraj’s share of goodwill adjusted with his capital account)        

 

 b) Goodwill is to be raised and written off

Date Particulars
L.F. Debit Credit
  Goodwill A/c Dr   4,50,000  
  To Madan’s Capital A/c       2,70,000
  To Gopal’s Capital A/c       1,80,000
  (Being goodwill written off which is already in the books)        
  Madan’s Capital A/c Dr   1,50,000  
  Gopal’s Capital A/c Dr   1,50,000  
  Sooraj’s Capital A/c Dr   1,50,000  
  To Goodwill A/c       4,50,000
  (Being Ram’s share of goodwill adjusted with his capital account)        

 

Working Note: –

Old Ratio of Madan and Gopal = 3 : 2
New Ratio of Madan, Gopal , and R = 1 : 1 : 1

Sacrificing Share = Old Ratio – New Ratio

Madan’s Sacrificing Share = 3 1
5 3
  = 9 – 5
15
  = 4 Sacrifice
  15

 

Gopal’s Sacrificing Share = 2 1
5 3
  = 6 – 5
15
  = 1 Sacrifice
  15

 

Sacrificing Ratio = 4 : 1
15 15
  = 4 : 1

 

 

Sooraj’s Share of Goodwill = Firm’s Goodwill  X  Share of E’s
  = 4,50,000 X 1
3
  = 1,50,000
   

Sacrificing Ratio of Madan and Gopal = 4 : 1

Madan will get Share of Goodwill = Sooraj’s Goodwill X  Sacrifice share of A
  = 1,50,000 X 4
5
  = 1,20,000
 

 

Gopal will get Share of Goodwill = Sooraj’s Goodwill  X  Sacrifice share of A
       
  = 1,50,000 X 1
5
  = 80,000

 

 

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 40 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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