Question 61 Chapter 6 of +2-A
61. P, R and S are in partnership sharing profits 4/8, 3/8 and 1/8 respectively. It is provided in the Partnership Deed that on the death of any partner his share of goodwill is to be valued at one-half of the net profit credited to his account during the last four completed years. R died on 1st January 2018. The firm’s profits for the last four years ended 31st December, were as: 2014 − 1,20,000; 2015 − 80,000; 2016 − 40,000; 2017 − 80,000.
a Determine the amount that should be credited to R in respect of his share of Goodwill.
b Pass Journal entry without raising Goodwill Account for its adjustment.
The solution of Question 61 Chapter 6 of +2-A: –
Profit credited to R’s Capital Account in 4 years = Net profit for the last four years × R’s Share
| = | 1,20,000 + 80,000 + 80,000 + 4,000 | X | 2 | |
| 12 | ||||
| = | 3,20,000 | X | 3 | |
| 8 | ||||
| = | Rs 1,20,000 |
R’s Share of goodwill
| = | 1,20,000 | X | 3 | |
| 8 | ||||
| = | Rs 60,000 |
| Date | Particulars |
L.F. | Debit | Credit | |
| b | P’s Capital A/c | Dr. | 48,000 | ||
| S’s Capital A/c | Dr. | 12,000 | |||
| To R’s Capital A/c | 60,000 | ||||
| (Being R’s share of goodwill adjusted) | |||||
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
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