Ser ay ‘OF A PARTNER TREATMENT OF GOODWILL Goodwill A/c is not raised in the Books of Accounts. Gaining Partners Capital A/es _ Dr ‘To Retiring / Deceased Partners Capital A/e Goodwill is raised at its full value and written off. : : eo “Goodwill Ale Dr. _ (Current value of Goodwill) To All Partners Capital A/cs (In old Profit Sharing Ratio) (being the goodwill raised at its current value) : Continuing Pariner’s Capital Ales Dr. (in New Profit Sharing Ratio) To Goodwill A/c (being the goodwill A/c written off in New Profit sharing Ratio) Case 3. Goodwill is Raised to the extent of retiring or deceased Partner’s Share and is written off. Goodwill A/c Dr. (Share of retiring or deceased Partners in Current Value of Goodwil Ee 7 Retiring or deceased Partner’s A/c ining Partner’s Capital A/c in their gaining rati ae e : Dr. (in their gaining ratio) Casel WHEN GOODWILL ALREADY APPEARS IN THE BOOKS All Partner’s Capital A/c Dr. is . Tn old To Goodwill A/c ala (being existing goodwill written off) NITTIN CupraQe Qa, Nrr ent of Hari from the firm of ‘Hari , Ram and Sharma’ the Balance Sheet showed a debit balance of 712,000 in the profit and loss account. For calculating the amount payable to Hari this balance will be transferred (a) to the credit of the capital accounts of Hari, Ram and Sharma equally. (b) to the debit of the capital accounts of Hari, Ram and Sharma equally. (©) to the debit of the capital accounts of Ram and Sharma equally. (@) to the credit of the capital accounts of Ram and Sharma equally. Amit, Balan and Chander were partners in a firm sharing profits in the proportion of 1/2, 1/3 and 1/6 respectively. Chander retired on 1-4-2014, The Balance Sheet of the firm on the date of Chander’s retirement was as follows: Liabilities Amt (%) | Assets Amt. @) Sundry Creditors 12,600 | Bank 4,100 Provident Fund 3,000 | Debtors 30,000 General Reseve 9,000 | Less:Provision 1,000 29,000 Capitals : Stock 25,000 Amit 40,000 Investments 10,000 Balan 87,000 Patents 5,000 Chander 20.000 96,500 | Machinery 48,000 1,21,000 1,21,000 It was agreed that. (Goodwill will be valued at 227,000. (ii) Depreciation on machinery @ 10%. (iii) Patents were to be reduced by 20%. (iv) Liability on A/c of provident funds was estimated (v) Chander took over investment for 715,800. (vi) Amit and Balan decided to adjust their capital in proportion of their profit sharing ratio by opening current account. Prepare Revaluation A/c & Partner’s Capital Account, On 1.1.2008 Uday and Kaushal entered into partnership with fixed capital of 27,00,000 and %3,00,000 respectively. They were doing good business and were interested in its expansion ; but could not do the same because of lack of capital. Therefore, to have more capital, they admitted Govind as a new partner on 1.1.2010. Govind brought €10,00,000 as capital and the new profit sharing ratio decided was 3 : 2: §. On 1.1.2012, another new partner Hari was admitted with a capital of €8,00,000 for 1/10th share in the profits, which he acquired equally from Uday, Kaushal and Govind. On 1.4.2014 Govind died and his share w: Usay and Hari equally. Calculate: fas taken over by () The sacrificing ratio of Uday and Kaushal on Govind’s admission, Gi) New profit sharing ratio of Uday, Kaushal, Govind and Hari on Hari’s admission. (iii) New profit sharing ratio of Uday, Kaushal and Hari on Govind’s death. On 1.4.2014, their Balance Sheet was as follows: IN GUPTA 9650062072 / 9999891963Q6. Q7. Liabilities Amt (%) | Assets {Amt. @k Sundry Creditors 41,400 | Cash at Bank 3000 Capital Accounts ‘Xavier 1,20,000 Sundry Debtor , suf 90,000 30, ; ae 60,000 | 2,70,000 | Less : Provision for Bad Debts _1,050 48,000 as Stock 51,000 Plant and Machinery 150,009 Land and Building ina 311,400 3a Yusuf has been suffering from ill health and thus gave notice of retirement form the firm. Ay, agreement was, therefore, entered into as on 1.4.2014, the terms of which were as follows: (i) That land and building be appreciated by 10% (ii) That provision for bad debts is no longer necessary. (iii) That stock be appreciated by 20%. Gv) ‘That goodwill of the firm be fixed at 854,000. Yusut’s share of the same be adjusted into Xavier's and Zaman’s Capital Accounts, who are going to share future profits in the ratio of 2 : 1 Gv) ‘The entire capital of the newly constituted firm be readjusted by bringing in or paying necessary cash so that future capitals of Xavier and Zaman will be in their profit sharing Tatio. Prepare Revaluation Account and Partner’s Capital Accounts. At the time of retirement of a partner, accounts of : (@) Retiring Partner. (b) All partners, in the old profit sharing ratio, (¢) The remaining partners in their old profit sharing ratio, (The remaining partners in their new Alia, Karan and Shilpa were partners in appeared in their books at a value of' retire from the firm. On the date of h; The new profit sharing decided an entries of Karan’s retirement, Lalit, Madhur and Neena ware Partners sharing profit as 509 YY ively. March 31st, 2013 their Balance Sheet was follows: tae pie ae profit on revaluation will be credited to the capita profit sharing ratio. c a firm sharing profits in the ratio of 5 : 3:2. Goodwill %60,000 and General Reserve at 220,000. K is retirement goodwill of the firm was v; mong Alia and Shilpa was 2 : 3. Recor aran decided to alued at %2,40,000. ‘d necessary Journal NITTIN GUPTA 3 9650062072 / 999989196So EEA—Aa_aE—— ————————E——— abilities ‘Amt (® [Assets Amt. @) Creditors 28,000 | Cash 34,000 Provident Fund 10,000 | Debtors 47,000 Investment Fluctuation Fund 10,000 | Less: Provision for Doubtful Debts __3,01 44,000 Capitals : Stock 15,000 Lalit 50,000 Investments 40,000 Madhur 40,000 Goodwill 20,000 Neena 25,000 | 1,15,000 | Profit and Loss A/c 10,000 1,63,000 1,63,000 On the Date, Madhur retired and Lalit & Neena agreed to continue on the following terms: (a) The goodwill of the firm was valued at 51,000. (b) There was a claim for workmen’s compensation to the extent of 6,000. ()_ Investments were brought down to 715,000. (d) Provision for bad debts was reduced by 21,000. (e) Madhur was paid 710,300 in cash and the balance was transferred to his loan account payable in two equal instalments together with interest @12% p.a. Prepare Revaluation Account, Partner’s Capital Accounts and Madhur’s Loan Account till the loan is finally paid off. Qs At the time of retirement of a partner ‘Loss on Revaluation’ is debited: (a) Only the capital account of the retiring partner. © (c)_ to the capital accounts of the remaining partners in their new profit sharing ratio. (d) to the capital accounts of remaining partners in their old profit sharing ratio. Q9. X,Y and Z were partners in a firm sharing profits as in the ratio of 5 : 3 : 2. On 31-3-15 their Balance Sheet was as follows : to the capital accounts of the all partners in their old profit sharing ratio. Balance Sheet of X, Y and Z as on 31st March, 2015 Liabilities Amt (®) | Assets Amt. @) Creditors 21,000 | Land and Building 62,000 Investment Fluctuation Fund 10,000 | Motor 20,000 Profit & Loss Account 40,000 | Investments 19,000 Capitals : Machinery 12,000 x 50,000 Stock 15,000 Y 40,000 Debtors 40,000 Zz 20.000 | 1,10,000] Less: Provision 3,000| 37,000 Cash 16,000 1,81,000 1,81,000 o the above date, Y retired and X and Z agreed to continue the business on the following ‘Ms : 1. Goodwill of the firm was valued at 51,000. MITTIN GuPTA 9650062072 / 9999891963Ss Compensation = ‘claim of €4,000 for ‘Workmen's cae 2, There was @ .d by €1,000. ae 2. , Cine be transfer ra : sion for bad debts was i se will : 3, Provision Fora in cash ant the BALAN er wil intrest @ 10% pa. 4. Ywill er ei four equal yearly instalments ae a and thet capital will be in 9 = will be 3:28 : eer, via bowwoen X and Z will BES +7 yy opening curren 5, The new profit sharing f eal their new profit sharing accounts. Prepare Revaluation Account, reconstituted firm. On 31st March, 2015 thi ratio, The capital Partner’s Capitals ‘Accounts and the Balance Sheet of the artnel a aring profit: e Balance Sheet of Saman, Harish and Meeta who were sharing P ).10. : : and losses in the ratio of 2 :3 : 2 stood as follows a h, 2015 Balance Sheet of Saman, Harish and Meeta as on 31st Marel reraGl See Amt (®) | Assets a Liabilities Land and Building WO. 5 1,90,000 Capitals : hi awe o> 5,00,000 Saman 10,00,000 Machinery 3'70,000 Harish 15,00,000 Furniture S oauOs Meeta 10,00,000 } 35,00,000 | Closing Stock 7.00000 Workman Compensation Fund | 8,40,000 | Sundry Debtors 00.000 Sundry Creditors 5,10,000 | Cash pisses 48,50,000 48,50,000 On 3ist March, 2015 Harish retired from the firm and the remaining partners decided to carry on the business. It was agreed to revalue the assets and liabilities as follows: Land and Building be appreciated by 20%. Machinery be depreciated by 20% (iii) Closing stock be valued at %4,50,000. ( (iv) Provision for doubtful debts be made at 5% on Debtors. (v) Sundry creditors of 265,000 be written off. (vi) eel of 7 fim be ahd at 5,60,000 and Harish’s share of the goodwill be ad, iecounts of Saman and Meeta who will in the ratio of 3 : 2. will share the future profits and losse: (vii) The total capital of the newly constituted i 3. i iy pene aa eas firm will be %35,00,000, which will be adjustet (viii) Amount due of Harish was settled by ing a bi : afler 4 months. accepting a bill of exchange in his favour payable Prepare Revaluation A/c, P , Partner’: i QI. Amar, Ram, Mohan and Sohan ner’ Capital Account & Balance Sheet were partners in ‘ : é pee sharing profits in the ratio of 2:2: atio between Aen ee Soodwill of the firm ve 'n Amar, Ram and mohan was agreed NITTIN GUPTA 9650062072 / 9999891964eT Qi. QB. Qu4. Qus. Ri aay ¥ ‘Showing your working notes clearly, pass necessary Journal Entry for the treatment of good- will in the book of the firm on Sohan’s retirement. M,N and G were partners in a firm sharing profits an losses in th ratio of 5 : 3 : 2. On 31-3-2016 their Balance Sheet was as under: Balance Sheet of M, N and G as on 31-3-2016 ‘Amt @ | Assets Amt. @) ‘Sundry Creditors 55,000 | Cash 40,000 General Reserve 30,000 | Debtors 45,000 Capitals : Less : Provision 5,000 40,000 M 1,50,000 Stock 50,000 N 1,25,000 Machinery 1,50,000 G 75,000 | 3,50,000| Patents 30,000 Building 1,00,000 Profit & Loss A/c 25,000 4,35,000 4,35,000 M retired on the above date and it was agreed that: (i) Debtors of $2,000 will be written off as bad debts and a provision of 5% on debtors for bad and doubtful debts will be maintained. (ii) Patents will be completely written off and stock, machinery and building will be depreciated by 5%. (iii) An unrecorded creditor of 210,000 will be taken into account. (iv) Nand G will share the future profits in the ratio of 2 : 3. (v) Goodwill of the firm on M’s retirement was valued at €3,00,000. Pass necessary Journal Entries for the above transactions in the books of the firm on M’s retirement. X, Y and Z were partner sharing profits and losses in the ratio of 3 : 2 : 2. Z retired and the amount due to him was €85,000. He was paid 75,000 immediately. The balance was payable in three equal annual instalments carrying interest @ 6% p.a. Pass necessary Journal entry for recording the same on the date of Z’s retirement. In which ratio do the remaining partners acquire the share of profit of the retiring partner? Ativ, Meha and Nupur were partners sharing profits and losses in the ratio of 5:3 : 2. On 31- 3-2016, their Balance Sheet was as under: Liabilities [Amt ® [Assets Amt. @ Trade Creditors 26,500 | Bank 25,000 Employees Provident Fund - 23,500 | Debtors 30,000 Ativ’s Capital 1,00,000 | Stock 55,000 Meha’s Capital 50,000 | Fixed Assets 1,20,000 Nupur’s Capital 40,000 | Advertisements expenditure 10,000. 2,40,000. 2,40,000 Ativ retired on 1.4-2016. For this purpose, the following, adjustments were agreed upon:Q16. i yas to be Valueu ats years ps ‘a) Goodwill the firm was M = years preceding the date of retirement. The pro! 2013-14 %55,000; 2014-15 %65,000; 2015-15 %60,000. (b) Fixed assets were to be increased by 725,000. os Tre “etc fits for previous years were: = (0) Stock was overvalued by 25,000. iately paid to Ativ (@) _%20,000 were immediately p: : Prepare Revaluation Account, Partner’s Capital Accounts and the Balance Sheet of th, reconstituted firm. Aman, Yatin and Uma were partners and were sharing profits and losses in the ae of S33 : 2. Uma retired and her share was taken over by Aman and Yatin 5 : 3 in ratio. Calculate th, gaining ratio of Aman and Yatin. and the balance was transferred to his loan accouny Q.17. Kavya, Manya and Navita were partners sharing prifits as 50%, 30% and 20% respectively. Or Loon 31-3-2016, their Balance Sheet was as under : —~ TDabilites Amt ®) [Assets ‘Amt. @ Creditors 1,40,000 | Fixed Assets 8,90,000 General Reserve 1,00,000 | Investments 2,00,000 Capitals: Stock 1,30,000 Kavya 6,00,000 Debtors 4,00,000 Manya 5,00,000 Less : Provision for Navita 4,00,000 | 15,00,000 bad debts 30,000} — 3,70,000: Bank 1,50,000 17,40,000 17,40,000 On the above date, Kavya retired and Manya and Navita agreed to continue the business on th: following terms : (@) Finm’s goodwill was valued at 60,000 and it was decided to adjust Kavya’s share oQ.1 goodwill in the capital accounts of continuing partners. (©) There was a claim for workmen’s compensation to the extent of 74,000. (©) Investments were revalued at %2,13,000, Q2 (@) Fixed Assets were to be depreciated by 10%. Lue (©) Kavya was to be paid 220,000 through Joan account which will be ridin an draft and the balance was transferred to he! 10% pa qual annual instalments together with interest @ Prepare Revaluation A/c, Par i » Partner’s Capi finally paid. “pital accounts and Kavya’s Loan Account till it NITTIN GUPTA NinQus. Guise, rch, 2018 was as under: lance Sheet As at 313.18 Liabilities Amt & [Assets ‘Amt. @), Capital Accounts : Buildings 1,20,000 Adit 40,000 | Motor 18,000. Bhavya 30,000 | Stock 20,000 Cris 20,000 | Investments 20,000 General Reserve 10,000 | Debtors 40,000 Investment Cash at Bank 12,000 Fluctuation Reserve 7,000 Sundry creditors 1,23,000 2,30,000[ 2,30,000 The partners share profits in the ratio of 5:3:2. On 1-4-2018. Cris retires from the firm on the following terms and conditions: (i) 20% of the General Reserve is to remain as a reserve for bad and doubtful debts (ii) Motor car is to be reduced by 5% (iii) Stock is to be revalued at 217,500 and investment to be re-valued at 718,000 (iv) Goodwill is to be valued at 3 year’s purchase of the average profits of last 4 year’s. Profits of the last four years were: 2014-15 %13,000; 2015-16 %11,000; 2016-17 816,000 and 2017-18 %24,000 Cris was paid in full. Adit and Bhavya borrowed the necesary amount from the Bank on the security of Building to pay off Cris. Pass necessary journal entries. Neetu, Meetu and Teetu were partners in a firm. On Ist January, 2018, Meetu retired. on Meetu’s retirement the goodwill of the firm was valued at %4,20,000. Pass necessary Journal entry for the treatment of goodwill on Meetu’s retirement. . Banwari, Girdhari and Murari are partners in a firm sharing profits and losses in the ratio of 4 : Upr 5:6. On 31st March, 2014, Girdhari retired. On that date the capitals of Banwari, Girdhari and Murari before the necessary adjustments stood at%2,00,000, 1,00,000 and 50,000 respectively. On Girdhari’s retirement, goodwill of the firm was valued at 71,14,000. Revaluation of assets and reassessment of liabilities resulted in profit of $6,000. General Reserve stood in the books of the firm at %30,000. The amount payable to Girdhari was transferred to his loan account. Banwari and Murari agreed to pay yearly instalments of %75,000 each including interest @10% p.a. on the outstanding balance during the first two years and the balance including interest in the third year. The firm closes its books on 31st March every year. Prepare Girdhari’s Loan Account till it is finally paid showing the working notes clearly. (cee rat) NIPTIN Armen —sn the ratio 339s pe Sharing profits and 10s ots ie) es na d Naresh Weir lows : Monat Me 2013, "heir Balance Sheet Was 28 a Bo - Gn 31st March, 2015, : i indies 70) Land and Building 10,00,000 " 7,60,0 a 00060 Trade Creditors ‘44,000 | Machinery =o Bank Overdraft 4,00,000 | Furniture 7.00.00 ae ica Fund 76,000 ee oo Employees" Provi ee 0 capa: ems 00 Sundry Debtors “i Naresh 10,50,000 31,00,000] Bank ; : Deferred Advertisement Expenditure _1,00,000 37,80,000 37.80.00 On 31st March, 2015, Madan retired from the firm and the remaining partners decided to car on the business. It was decided to revalue assets and liabilitied as under : ‘ i) Land and Building be appreciated by %2,40,000 and Machinery be depreciated by 10% (ii) 50% of Investments were taken over by the retiring partner at book value. (iii) An old customer Mohit whose account was written off as bad debt has promised to pay 27,000 in settlement of his full debt of 710,000 (iv) Provision for Doubtful Debts was to be made at 5% on debtors. () cae Stock will be valued at market price which is %1,00,000 less than the bool : : (vi) Goodwill of the firm be valued at %5,60,000 and Madan’s share of goodwill}o shar, future profits and losses in the ratio of 3: 2. 4 (vii) The total capital of the new firm will be %32,00,000 which will be i 00,000 which will b ion o the profit-sharing ratio of Leena and Naresh. + in the proportion ol (viii) Amount due to Madan was settled b* in hi Ammat Sta led by accepting a Bill of Exchange in his favour payabl Prepare Revaluation Account, Pai after Madan’s retirement, irtners’ Capital Accounts and Balance Sheet of the firm (CB.S.E. 2016, Comptt. All India) Kyo oadjeltd ih the Anon «f Lene Btheo dhurdid go Sd Hench «Ute NITTANY AeCHAP” = INES (Retirement ofa Partner) AnsI. (B) : ne ‘Ane 2. Revaluation (Profit) = 6,00 ; Capital (A = 48,000 5 B = 32,000 ; C's ‘Ans3, Sacrificing ratio (U:K)=( 2:3) K:G:H)=(8:5: 14:3) Loan A/e = 10,300) 3:1:2) ‘Ans4, Revaluation (Profit ) = 25,650, Capital : X = 1,19,400 ; 2= 59,700; Y's Loan = 1,16,550 ‘Ans5. (Ball partner's, in the old profit sharing ratio ‘Ans 7, Revaluation ( Loss ) = 20,000 ; Capital L = 14,070 ; N of all partner's in old profit sharing ratio. |Ans9, Revaluation ( Loss )= 3,000 , Capital : X = 52,560 ; Z = 35,040 ; Y Loan's Ale = 61,200 Balance Sheet = 1,89,640 (Total ), Cash = 7,800 = 10,630Ans 14. (B ) to capital A/c = § = 21,00,000 ; M = 14,00,000 ; Harish bill's alance Sheet : 61,56,430 (Total) ‘Ans 10. Revaluation ( Profit ) = 2,60,000 , Capita payable 22,11,430 ; Gaining ratio= 11:45 Ans 11. ‘Amar’s Capital A/c Dr 30,000 To Ram’s Capital A/e 10,000 To Mohan’s Capital A/c 10,000 To Sohan’s Capital Ale 10,000 Ans 12. Dr. Provision for Doubtful Debts Account Cr. Particulars Amount] Particulars Amount To bad debts 2,000 | By balance b/d 5,000 To revaluation (b/f) 850 : To Balance (c/d) 2,150 [5% of 43000] zo00} Gaining ratio= 1:4 am Ans 13. Z’s Capital Ale Dr To Cash A/c ieee To Z’s Loan Alc oom Ans 14. The remainin aa ‘ g partner’s acquire the s| a ‘tio quire the share of profit of retiring partners in their profit sharing Ans 15. Revaluation ( | profit ) = 20,000 , Capital : ‘ ,000 , Capital : Neha = 17000 ; Nupur = it : 3 Nupur = 18000 ; 's Loan 1,45,000 ; Balance Sheet = 2,30,000 Po ITTIN GUPTA 9650062072 / 9999891963Answers Reuse ‘Ans 16. ‘Ans 17. ‘Ans 18. ‘Ans 20. Ans 21 Gaining Rai 23 Revaluation (Loss) = 80,000; Capital A/e = M : 4,88,000 ; N : 3,90,000 ; K’s Loan : 6,20,000 Revaluation (Loss) = 3,400 ; Cris Capital A/c = 31,520 Girdhari’s Loan A/c = 1,50,000 Interest Instalment 1. 15,000 75,000. 2. 9,000 75,000 3. 2,400 26,400 Leena, Madan, Naresh Revaluation gain 76,650, Capital Leena 19,20,000 Naresh 12,80,000 Balance Sheet 47,33,329