Question 64 Chapter 6 of +2-A
64. X, Y and Z were partners in firm sharing profits in the ratio of 4 : 3: 1. The firm closes its books on 31st March every year. On 1st February 2019, Y died and it was decided that the new profit-sharing ratio between X and Z will be equal. Partnership Deed provided for the following on the death of a partner: a His share of goodwill be calculated on the basis of half of the profits credited to his account during the previous four completed years. The firm’s profits for the last four years were:
| Year | 2014-15 | 2015-16 | 2016-17 | 2017-18 |
| Profits | 1,50,000 | 1,00,000 | 50,000 | 1,00,000 |
b His share of profit in the year of his death was to be computed on the basis of the average profit of the past two years.
Pass necessary Journal entries relating to goodwill and profit to be transferred to Y’s Capital Account.
The solution of Question 64 Chapter 6 of +2-A: –
| Date | Particulars |
L.F. | Debit | Credit | |
| Z’s Capital A/c | Dr. | 75,000 | |||
| To Y’s Capital A/c | 75,000 | ||||
| (Being Adjustment of Y’s share of Goodwill) | |||||
| Z’s Capital A/c | Dr. | 23,438 | |||
| To Y’s Capital A/c | 23,438 | ||||
| (Being Adjustment of Y’s share of Profit) | |||||
Working Notes:
Calculation of Gaining Ratio
Y :Z=4:3:1(Old ratio)
X :Z=1:1(New ratio)
Gaining Ratio = New Ratio – Old Ratio
| X’s Gain | = | 1 | – | 4 |
| 2 | 8 | |||
| = | 4 | – | 4 | |
| 8 | ||||
| = | 0 | |||
| 8 | ||||
| Z’s Gain | = | 1 | – | 1 |
| 2 | 8 | |||
| = | 4 | – | 1 | |
| 8 | ||||
| = | 3 | |||
| 8 | ||||
Y’s share of goodwill=4,00,000×38×12=Rs 75,000Y’s share of goodwill will be brought by Z only
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Calculation of Retiring Partner’s Share of Profit
| = | 75,000 | X | 3 | X | 10 | |
| 8 | 12 | |||||
| = | Rs 23,438 |
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
