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Accountancy · 2023 · 3 marks
Reconstitution of a Partnership Firm – Retirement/Death of a PartnerTreatment of Goodwill3 marksshort answer
CBSE 2023 · Region 5 · Set 2 · Q17
Tarun, Abhishek, Kamal and Vivek were partners in a firm sharing profits in the ratio of 5: 3: 2: 2. Kamal retired on 31" March, 2022. Tarun,…
Tarun, Abhishek, Kamal and Vivek were partners in a firm sharing profits in the ratio of $\displaystyle 5$ : $\displaystyle 3$ : $\displaystyle 2$ : 2. Kamal retired on $\displaystyle 31$" March, 2022. Tarun, Abhishek and Vivek decided to share future profits equally. On Kan al's retirement goodwill of the firm was valued at ₹ $\displaystyle 9{,}00$,000. Showing your working clearly, pass the necessary journal entry for treatment of goodwill on Kan al's retirement. It was decided not to show goodwill in the books of the firm.
Atul and Geeta were partners sharing profits in the ratio $\displaystyle 3$ : 2. Ira was admitted into the firm for $\displaystyle 1$/$\displaystyle 4$*h share of profits. Ira brought ₹ $\displaystyle 40{,}000$ as her capital. The capitals of Atul and Geeta after all adjustments relating to goodwill, revaluation of assets and liabilities etc. are ₹ $\displaystyle 60{,}000$ and ₹ $\displaystyle 40{,}000$ respectively. It is agreed that capitals should be according to the new profit sharing ratio. Calculate the amount of actual cash to be paid off or brought in by the old partners. Pass the necessary journal entry/entries for the same.
Marking-scheme solution
Books of Tarun, Abhishek, Kamal and Vivek
JOURNAL
Date Particulars L.F. Dr. Cr.
Amount( ₹) Amount( ₹)
$\displaystyle 2022$ Abhishek’s Capital A/c Dr. $\displaystyle 75{,}000$
March $\displaystyle 31$ Vivek’s Capital A/c Dr. $\displaystyle 1{,}50{,}000$
To Kamal’s Capital A/c $\displaystyle 1{,}50{,}000$
To Tarun’s Capital A/c $\displaystyle 75{,}000$
(adjustment for goodwill in gaining
ratio on Kamal’s retirement)
Working
Old Ratio – Tarun: Abhishek: Kamal: Vivek = $\displaystyle 5$:$\displaystyle 3$:$\displaystyle 2$:$\displaystyle 2$
New Ratio - Tarun: Abhishek: Vivek = $\displaystyle 1$:$\displaystyle 1$:$\displaystyle 1$
Gaining Share of Tarun = New Share – Old Share
= $\displaystyle 1$/$\displaystyle 3$ – $\displaystyle 5$/$\displaystyle 12$
= (-) $\displaystyle 1$/$\displaystyle 12$ {sacrifice}
Gaining Share of Abhishek = New Share – Old Share
= $\displaystyle 1$/$\displaystyle 3$ – $\displaystyle 3$/$\displaystyle 12$
= $\displaystyle 1$/$\displaystyle 12$ {gain}
Gaining Share of Vivek = New Share – Old Share
= $\displaystyle 1$/$\displaystyle 3$ – $\displaystyle 2$/$\displaystyle 12$
= $\displaystyle 2$/$\displaystyle 12$ {gain}
Kamal’s share of Goodwill = $\displaystyle 2$/$\displaystyle 12$ x $\displaystyle 9{,}00{,}000$ = ₹$\displaystyle 1{,}50{,}000$
Q. Atul and Geeta were partners ……………………………….
Ans.
Books of Atul and Geeta
JOURNAL
Date Particulars L.F. Dr. Cr.
Amount( ₹) Amount( ₹)
Cash or Bank A/c Dr. $\displaystyle 20{,}000$
To Atul’s Capital A/c $\displaystyle 12{,}000$
To Geeta’s Capital A/c $\displaystyle 8{,}000$
(cash brought in by Atul and Geeta for
capital adjustment on Ira’s admission)
Working
Old Ratio = Atul : Geeta = $\displaystyle 3$:$\displaystyle 2$
Ira admitted for $\displaystyle 1$/$\displaystyle 4$ share,
Remaining Share for Atul and Geeta = $\displaystyle 1$-$\displaystyle 1$/$\displaystyle 4$ = $\displaystyle 3$/$\displaystyle 4$
New Share of Atul = $\displaystyle 3$/$\displaystyle 5$ x $\displaystyle 3$/$\displaystyle 4$ = $\displaystyle 9$/$\displaystyle 20$
New Share of Geeta = $\displaystyle 2$/$\displaystyle 5$ x $\displaystyle 3$/$\displaystyle 4$ = $\displaystyle 6$/$\displaystyle 20$
New Ratio = Atul : Geeta : Ira = $\displaystyle 9$:$\displaystyle 6$:$\displaystyle 5$
Total Capital of New Firm = ₹$\displaystyle 40{,}000$ x $\displaystyle 4$ = ₹$\displaystyle 1{,}60{,}000$
Atul Geeta
Amount (₹) Amount (₹)
New Capital $\displaystyle 72{,}000$ $\displaystyle 48{,}000$
Less Existing Capital $\displaystyle 60{,}000$ $\displaystyle 40{,}000$
Cash Brought In $\displaystyle 12{,}000$ $\displaystyle 8{,}000$
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