Question 46 Chapter 5 of +2-A
46. Asin and Shreyas are partners in a firm. They admit Ajay as a new partner with 1/5th share in the profits of the firm. Ajay brings 5,00,000 as his share of capital. The value of the total assets of the firm was 15,00,000 and outside liabilities were valued at 5,00,000 on that date. Give necessary Journal entry to record goodwill at the time of Ajay’s admission. Also show your workings.
The solution of Question 46 Chapter 5 of +2-A: –
| Date | Particulars |
L.F. | Debit | Credit | |
| Ajay’s Current A/c | Dr | 2,00,000 | |||
| To Asin’s Capital A/c | 1,00,000 | ||||
| To Shreya’s Capital A/c | 1,00,000 | ||||
| (Being for goodwill distributed in equal ratio) | |||||
Total Capital of the firm on the Basis of C’sCapital
Total Capital of the firm = Ajay’s Capital * Reciprocal of his share
| = | 5,00,000 | * | 5 | |
| 1 | ||||
| = | 25,00,000 |
Net Worth = Total Assets – Outsiders’ Liabilities – Ajay’s Capital
| = | 15,00,000-5,00,000+ 5,00,000 | |
| = | 15,00,000 |
| Goodwill | = | Total Capital of the firm on basis of Cs Capital |
– Net Worth |
| = | 25,00,000 | -15,00,000 | |
| = | 10,00,000 |
| Ajay’s Share of Goodwill | = | Firm’s Goodwill x | Share of Ajay |
| = | 10,00,000 | X | 1 | |
| 2 | ||||
| = | 2,00,000 |
Sacrificing Ratio of Asin and Shreya =- 1 : 1
| Asin’s will get Share of Goodwill | = | Ajay’s Goodwill X | Sacrifice share of Asin’s |
| = | 2,00,000 | X | 1 | |
| 2 | ||||
| = | 1,00,000 |
| Shreya’s will get Share of Goodwill | = | Ajay’s Goodwill X | Sacrifice share of Shreya’s |
| = | 2,00,000 | X | 1 | |
| 2 | ||||
| = | 1,00,000 |
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
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
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