Question 45 Chapter 5 of +2-A
Table of Contents
45. X and Y are partners with capitals of 50,000 each. They admit Z as a partner for 1/4th share in the profits of the firm. Z brings in 80,000 as his share of capital. The Profit and Loss Account showed a credit balance of 40,000 as on the date of admission of Z.
Give necessary journal entries to record the goodwill.
The solution of Question 45 Chapter 5 of +2-A: –
| Date | Particulars |
L.F. | Debit | Credit | |
| Z’s Current A/c | Dr | 25,000 | |||
| To X’s Capital A/c | 12,500 | ||||
| To Y’s Capital A/c | 12,500 | ||||
| (Being for goodwill distributed in equal ratio) | |||||
Total Capital of the firm on the basis of C’sCapital
Total Capital of the firm = C’s Capital * Reciprocal of his share
| = | 80,000 | * | 4 | |
| 1 | ||||
| = | 3,20,000 |
Actual Capital of Firm = Capital of Old Partners + Incoming Partner’s Capital
| = | 50,000+ 50,000+ 40,000+ 40,000 | |
| = | 2,20,000 |
| Goodwill | = | Total Capital of the firm on basis of Cs Capital |
– Actual Capital of Firm |
| = | 3,20,000 | -2,20,000 | |
| = | 1,00,000 |
| Z’s Share of Goodwill | = | Firm’s Goodwill x | Share of E’s |
| = | 1,00,000 | X | 1 | |
| 4 | ||||
| = | 25,000 |
Sacrificing Ratio of X and Y = 1 : 1
| X will get Share of Goodwill | = | Z’s Goodwill X | Sacrifice share of X |
| = | 25,000 | X | 1 | |
| 2 | ||||
| = | 12,500 |
| Y will get Share of Goodwill | = | Z’s Goodwill X | Sacrifice share of Y |
| = | 25,000 | X | 1 | |
| 2 | ||||
| = | 12,500 |
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
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
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