Question 45 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 45 Chapter 5 of +2-A

Question 45 Chapter 5 of +2-A

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)

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 45 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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