Question 61 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

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)

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 61 Chapter 6 of +2-A - T.S. Grewal 12 Class Part - A Vol. 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms