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ACCOUNTING FOR PARTNERSHIP(FUNDAMENTALS)

Q.1 A and B are partners but they do not have partnership agreement. How will
they solve the following disputes between them?
(a) A wants that profits be shared in the ratio of Capital.
(b) B wants that he should be paid salary for devoting more time for the
business of the firm.
(c) B had advanced a loan to the firm. He claims interest at the usual interest
rate charged by banks. The rate of interest is 13% p.a.
(d) A has contributed Rs.1,00,000 and B Rs.50,000 as capital. B Wants profit
to be shared equally.
(e) A invested Rs.1,00,000 and B only Rs.50,000 as capital. A wants interest
on capital @12% p.a.
(f) A spends twice the time that B devotes to the business. He wants salary of
Rs. 2000 per month for the extra time spent by him.
(g) A wants to introduce his son Rajesh in to the business. B objects it.
(h) A used Rs. 1,00,000 belonging to the firm and made a profit of Rs. 75,000
in speculation. B wants that A should return Rs. 1,75,000 to the firm while A
wants to return Rs. 1,00,000 only.
(i) A used Rs. 50,000 belonging to the firm and suffered a loss of Rs. 20,000 in
speculation. He wants to return only Rs.30,000.
(j) B wants to add 30 more partners but A says its not possible.
Ans.1
(a) Profit will be shared by A and B equally.
(b)B will not get the Salary because no partnership deed is given.
(c) B will be given interest on his loan @ 6% p.a.
(d)In the absence of the partnership deed profits will be shared equally so,
B is correct.
(e) No, interest on capital will be allowed because partnership deed is not
given.
(f) A is not entitled to any salary because partnership deed is not given.
(g) As son Rajesh cannot be admitted as a partner because B objects it. In
the absence of the partnership deed all the partners must agree to admit
Rajesh as a partner so, he cannot be admitted in the firm.
(h)A must return Rs.1,75,000 because he used firms money for business.
(i) A must return Rs.50,000 and bear loss himself.
(j) A can do so as per Companies Act, 2013 a partnership can be formed with
max. 50 partners
2. A,B and C are partners in a partnership firm with a capital of Rs.1,00,000
each.Partnership deed provides interest on capital @8% p.aDuring the year
2014-15 ,frim incurs the loss of Rs.24,000.What will be the interest on capital on
partners capital?
Ans: Interest on capital is not allowed in case of loss

3. Can a partner be exempted from sharing losses in a firm?If yes ,under what
circumstances.
Ans: Yes, if it is agreed between the partners that one or more of them shall not
be liable for losses.
4. State the reason for contribution of Goodwill by a new partner at the time of
admission.
Ans: To get share in future profits of the firm and to compensate the sacrificing
partners.

5. I f the partners capital accounts are fixed, where will you record the following
items :
i)

Salary to a partners

ii)

iii) Interest on capital and

Drawing by a partners
iv)

Share of profit earned by a

ii)

Debit

side

of

Partner's

iv)

Credit

side

of

Partners

partner
Ans.5

i)

Credit side of Partner's current A/c

current A/c
iii) Credit side of Partners current A/c
current A/c

INTEREST ON CAPITAL
6. Girish and Satish are partners in firm. Their capitals on 1 st April 2013 were
Rs.5,60,000 and Rs. 4,75,000 respectively. On 1 st August 2013 they
decided that their capitals should be Rs.5,00,000 each. The necessary
adjustment in the capitals were made by introducing or withdrawing cash.
Interest on capital is allowed @6% p.a. You are required to compute
interest on capital for the year ending 31st March 2014.
Ans.6. Interest on Capitals Girish Rs.31,200 and Satish Rs.29,000.

INTEREST ON DRAWING
7. A is a partner in a firm. During the year ended 31st March 2014 As
Drawings wereDate and Month
Amount of drawings
(Rs.)
st
1 June
1,000
1st August
750
st
1 October
1,250
st
1 December
500
1st February
500
2

Interest on drawings is charged @10% p.a. Calculate interest on drawings of A


for the year ended 31st March 2014.
Ans.7 interest on Drawings Rs.221.
Q.8

X, Y and Z are partners in a firm.You are informed that


(a) X draws Rs.4, 000 from the firm at the first day of every month.
(b) Y draws Rs.4, 000 from the firm at the end of the month.
(c) Z draws Rs. 4,000 from the firm in the middle of the month.
Calculate interest on drawing @6%pa for the year ending
st
31 March 2016.
Ans.8 Interest on Drawings X- Rs.1,560 , Y- Rs. 1,320 , Z- Rs. 1,440.
Q.9 Calculate the interest on drawings of Mr. Aditya @8% p.a. for the year
ended 31st March 2007, in each of the following cases
(a) If he withdrew Rs.5,000 in the beginning of each quarter.
(b) ) If he withdrew Rs.6,000 at the end of each quarter.
(c) ) If he withdrew Rs.10,000 during the middle of each quarter.
Ans.9 Case (a) Rs.1,000 (b) Rs.720 (c) Rs.1,600.
Q.10 Gupta is a partner in a firm. He withdrew regularly Rs. 800 at the
beginning of the every month for the six months ending 30 th September 2013
Calculate interest on drawings at 15% p.a.
Ans.10 Interest on drawings Rs.210.(average period 3.5 months)
Q.11 Gupta is a partner in a firm. He withdrew regularly Rs. 800 at the end of
the every month for the six months ending 30 th September 2013 Calculate
interest on drawings at 15% p.a.
Ans.11 Interest on drawings Rs.150.(Average period 2.5 months)
Q.12 Calculate the interest on drawing of Ram @6%p.a for the year ended 31 st March
2015 in the following cases:
a) If his drawings during the year were Rs.25000.
b) If he withdraw Rs.4,000 in the beginning of every month.
c) If he withdraw Rs.4000 at the end of every quarter.
d) If he withdraw Rs.4000 in the middle of every half year.
e) If he withdrew Rs.24,000 on 1st October 2014.

PROFIT AND LOSS APPROPRIATION ACCOUNT


12.L, M and N decided to start a partnership firm in backward area to manufacture
low cost paper bags from the waste paper as plastic bags were creating many
environmental problems .For this L and M contributed capital of Rs.2,00,000 and
Rs,1,00,000 respectively on 1st April 2014.
The partnership deed provided for the following:
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Interest on capital will be provided @6%p.a


Salary to L Rs.2,000 per month
Commission to M Rs.6,500
Profit sharing ratio 2:2:1
Due to shortage of fund L brought Rs.50,000 on 30 th September 2014 and M
Rs.20,000 on 1-1-2015 as additional capital. Prepare P& L Appropriation account
for the year ended 31st March 2015 when profit for the year is Rs.2,00,300.
(Ans: Divisible profit of L,M and N were 60,000 ,60,000 and 30,000
Values: Development of backward area,recycling of waste
material,Control of environment pollution)
13. A, and C are partners with fixed capitals of Rs. 2,00,000, Rs. 1,50,000 and Rs.
1,00,000 respectively. The balance of current accounts on 1st January, 2014 were
A Rs. 10,000 (Cr.); B Rs. 4,000 (Cr.) and C Rs. 3,000 (Dr.). A gave a loan to the firm
of Rs. 25,000 on 1st July, 2014. The Partnership deed provided for the following:(i)

Interest on Capital at 6% p.a

(ii)

Interest on drawings at 9%p.a Each partner drew Rs. 12,000 on 1st July,
2014.

(iii)

Rs. 25,000 is to be transferred in a Reserve Account.

(iv)

Profit sharing ratio is 5:3: 2 upto Rs. 80,000 and above Rs. 80,000 equally.

(v)

Net Profit of the firm before above adjustments was Rs. 1,98,360.

From the above information prepare Profit and Loss Appropriation Account, Capital
and Current Accounts of the partners.

Solution: 13
Profit and Loss Appropriation Account
for the year ended 31st December, 2014
Particulars

Amount

To Interest on Capital at 6% :

Particulars

Amount

By profit and Loss A/c 198360


Less: interest on A's Loan @ 6% p.a.
on Rs 25,000 for six months

750

197610
A

12000

9000

By interest on drawings @ 9% p.a.


for 6 months

on Rs 12,000
4

6000

27000

540
To reserve A/c

25000

To profit
A's current A/c

62410

B's current A/c

46410

C's current A/c

38410 147230

540

540

199230

1620

199230

14. P and Q are partners with capitals of Rs. 6,00,000 and Rs. 4,00,000 respectively.
The profit and Loss Account of the firm showed a net Profit of Rs. 4, 26,800 for the
year. Prepare Profit and Loss Appropriation account after taking the following into
consideration:(i)

Interest on P's Loan of Rs. 2,00,000 to the firm

(ii)

Interest on 'capital to be allowed @ 6% p.a.

(iii)

Interest on Drawings @ 8% p.a. Drawings were ; P Rs 80,000 and Q Rs.


1000,000.

(iv)

Q is to be allowed a commission on sales @ 3%. Sales for the year was Rs.
20,00,000

(v)

10% of the divisible profits is to be kept in a Reserve Account.

Solution:14

Profit and Loss Account for the year ended

Particulars
To Interest on P's Loan A/c

Amount
12000

Particulars

Amount

By profit before interest

426800

To Profit transferred to
P&L Appropriation A/c

414800
426800

426800

Profit and Loss Appropriation Account for the year ended.


Particulars
To interest on Capital

Amount

Particulars

Amount

By profit and Loss A/c (Profit)

414800

36000

24000

By interest on drawings
60000

3200

To Q's commission

60000

2000

To reserve A/c

30000

5200

To profit
P's Capital

135000

Q's capital

135000 270000
420000

420000

Notes:
(i)

If the rate of interest on Partners' Loan is not given in the question, it is to


be wed @ 6% p.a. according to the Partnership Act.

(ii)

Interest on Partners' Loan is treated as a charge against Profit, so it is


shown in the debit of Profit and Loss A/c.

(iii)

If the date of Drawings is not given in the question, interest on drawings


will be charged and average period of 6 months. .

(iv)

Reserve Fund is calculated at 10% on Rs. 3,00,000 (i.e. Rs. 4,26,800 + Rs.
5,200- 12,000 - Rs. 60,000 - Rs. 60,000.

15.A,B and C are partners in a firm .Their capital accounts stood at Rs.6,00,000
Rs.5,00,000 and Rs. 4,00,000 respectively on 1 st April 2013They shared profits
and losses in the ratio of 1:1:1.partners are entitled to interest on capital @10%
p.a and salary to B and C @Rs.7,000 per month and Rs.10,000 per quarter
respectively as per the provisions of partnership deed. From 1 st October 2013
they shifted their business on the premises of partner B,for which B takes
Rs.6,000 as rent from the firm.Cs share of profit (excluding interest on capital
but including salary ) is guaranteed at a minimum of Rs.80,000p.aAny deficiency
arising on that account shall be met by A.They decided to transfer 10% of
divisible profit to Reserve .The profits for the year ended 31 st March 2014
amounted to Rs.4,24,000.Prepare P& L Approriation account for the year ended
31st March 2014.
Ans 15:
Profit and Loss Appropriation account
(for the year ended 31st March 2014)
Particular
To Interest on Capital
A
60,000
B
50,000
C
40,000
To salary
B 84,000
C 40,000

Amount

Particular
By net profit

1,50,000

1,24,000
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Amount
3,88,000

To General reserve
(10% of 1,14,000)

11,400

To profit transfer to
capital A/cs
A 34,200-5,800
B 34,200
C 34,200 +5,800

28,400
34,200
40,000
3,88,000

3,88,000

16.
A and B are partners sharing profits in the ratio of 3 : 2. Interest on
Capital is allowed @10% p. a. and charged on drawings at the same rate.
Fill up the missing figures in the following accounts
Profit and Loss Appropriation Account
Dr.
For the year ended 31st March 2015
Cr.
Particulars (Dr)
Amount(R Particulars (Cr.)
Amount(R
s.)
s.)
To Salary to B
------------- By Profit and Loss ------------A/c
To
..
To
Partners
Current
ByInterestonDraw
Account :
ings
------------ 1,20,000
A- 2,500
-------------B1,500
------------------------------------------------2,84,000

Dr.
Cr.
Particulars
To
--------------

Dr.
Cr.
Particulars

Partners Capital Accounts


A (Rs.)
----------

B (Rs.)
----------

---------

----------

Particulars
By
-------------------

A (Rs.)
B (Rs.)
--------------- ------------------------ ----------

Partners Current Accounts


A (Rs.)

B
(Rs.)

Particulars

A (Rs.)

B (Rs.)

To ----------------

----------

To ----------------

----------

----------

-----------------

--------

By Balance b/d

16,000

22,000

By ----------------

---------

By Int.
on 80,000
Capitals
By ---------------------------------

60,000
----------------

(Hints to the answers: Capital opening balances interest on capital *100/r ,Net
profit Rs.2,80,000 Divisible profit A Rs.72,000 and B Rs.48,000 , Bs Salary
Rs.24,000)
GUARANTEE OF PROFIT
17.A and B are partners in a firm sharing profit in the ratio of 2:1.On 1 st Apr 2002
they decided to admit C for 1/5 share in the profit with the guaranteed amount of
Rs.25000 p.a. A and B equally undertook to meet the liability arising out of the
guaranteed amount . The firm earned a profit of Rs.75000 for the year ended 31 st
Mar 2003.Prepare P/L appropriation account.
(Ans: Deficiency Rs.10,000 to be met by A and B Rs.5,000 each)

18.

A, B and C entered into partnership on 1st April, 2014 to share profits &
losses in the ratio of 4:3:3. A, however, personally guaranteed that C's share of
profit after charging interest on Capital @ 5% p.a. would not be less than Rs.
40,000 in any year. The Capital contributions were:A, Rs. 3,00,000; B, Rs.
2,00,000 and C, Rs. 1,50,000. The profit for the year ended on 31st March, '2015
amounted to Rs. 1,60,000. Show the Profit & Loss Appropriation Account.

19.
A , B and C are partners sharing profits in the ratio of 5 : 4 : 1. C is
given a guarantee that his share of profit in any given year would be
5,000. Deficiency if any would be borne by A and B equally. The profit for
the year ended 31st March 2011 amounted to Rs.40,000. Prepare profit
and Loss Appropriation Account and also give Journal entries in the books
of the firm.
Ans. Deficiency of C borne by A and B Rs. 500 each.
20.A,B and C are partners in a firm .On 1st April ,2015.The balance in their capital
accounts stood at Rs.4,00,000 ;3,00,000 and 2,00,000 respectively.They shared
profits in the proportion of 5:3:2 respectively.As share of profit is guaranteed at
not less than Rs.12,500 p.a The firm suffered a loss of Rs.10,000 during the year
ended 31st march 2015.Show the journal entries for the distribution of profit and
loss.
(Ans: As share in profit Rs.12,500 Share of loss after deficiency B Rs.13,500 and
C Rs.9,000)

PAST ADJUSTMENT

21.
A, B and C are partners sharing profits in the ratio of 1 : 2 : 3 They
have been omitted interest on capitals @8% p.a. for year ended 31 st
March 2008 Their Fixed capitals were Rs.4,00,000 , Rs 6,00,000 and Rs.
8,00,000 respectively. Pass necessary adjusting entry.
Ans. Cs Current A/c Dr.
8,000
To As Current A/c 8,000.
22.
A, B, C, and D are partners sharing profits and losses in the Ratio of
2 : 2 : 3 : 3 respectively. After the accounts of the year had been closed it
was found that interest on drawings @6% p.a. has not been taken into
consideration. The drawing of the partners were A- Rs. 20,000, B- Rs.
24,000, C- Rs. 32,000 and D- Rs. 44,000. Give the necessary adjusting
entry.
Ds Capital A/c Dr. Rs. 240
To As Capital A/c
120
To Cs Capital A/c
120
st
23. On 1 April 2010 the capitals of A and B were Rs. 40,000 and Rs.
20,000respectively. They divided profits in their capital ratio. Profits for the
year ended 31st March 2011 were Rs.30,000 which have been duly
distribute among the partners but the following transactions were not
passed through the books
(a) Interest on Capitals @ 12 % p.a.
(b) Interest on Drawings A Rs.1,200 , and B Rs. 1.000.
(c) Commission due to B Rs. 2,000 on a special transaction.
(d) A is to be paid a salary of Rs. 5,000.
You are required to pass a journal entry on 10th April 2011.
23.
On 31st March 2006 after the close of accounts the capitals of
Mountain, Hill and Rock stood in the books of the firm at Rs.4.00,000,
Rs.3,00,000 and Rs.2,00,000 respectively. Subsequently it was discovered
that the interest on capitals @ 10% p.a. had been omitted. The profit for
the year amounted to Rs.1,50,000 and the partners drawings had been
Mountain Rs.20,000, Hill Rs.15,000 and Rock Rs.10,000. Calculate interest
on Capitals.
Ans.6 Interest on Capitals Mountain Rs.37,000 , Hill Rs.26,500 , and Rock
Rs.16,000.
24.The balance Sheet of P and Q as at 31st march 2015 after distributing profits ,but
without providing interest on capital @55p.a was as under:
Liabilites
Ps capital
Qs capital
Profit and Loss
Appropriation
account(2014-15)

Amount
60,000
50,000
20,000

Assets
Fixed asset
Current Assets
Drawings -Q

1,30,000

Amount
90,000
30,000
10,000

1,30,000

Profit during the year ending 31st March 2015 was Rs.35,000.P and Q share
profits in the ratio of 2:1.Drawings during the year ending 31 st March 2015 were
P Rs.8,000 and Q Rs.10,000.
Pass adjusting entry
Ans: Ps capital A/c Dr.
533
To Qs capital a/c
533
Opening capital of P and Q 58,000 and 45,000
VALUATION OF GOODWILL
25.A business has earned average profit of Rs. 60,000 during the last few years. The
assets of the business are Rs. 5,40,000 and its external liabilities are Rs. 80,000.
The normal rate of return is 10%. Calculate the value of goodwill on the basis of
capitalisation of super profits.
(Ans: Goodwill = Rs. 140000)
26.The capital of a firm of Arpit and Prajwal is Rs. 10,00,000. The market rate of
return is 15% and the goodwill of the firm has been valued Rs. 1,80,000 at two
years purchase of super profits. Find the average profits of the firm.
(Ans: Average Profit = Normal Profit

+ Super profit= 150000 + 90000=

240000)
27.The average profits for last 5 years of a firm are Rs. 20,000 and goodwill has
been worked out Rs. 24,000 calculated at 3 years purchase of super profits.
Calculate the amount of capital employed assuming the normal rate of interest is
8 %.
(Ans: Capital Employee = Normal Profit X 100/ Normal rate of return = 12000 X
100/8= Rs.150000)
28.Firms average profit are Rs.70,000 including abnormal profit of Rs.5,000.Capital
invested in the business is Rs.5,50,000 and the normal rate of return is
10%.Calculate Goodwill at four times of super profit.
29.Total capital employed by the firm is Rs.1,00,000 and its super profit is
Rs.5,000.Rate of return 20%.Calculate average profit.
30.A business earned average profit of Rs.1,00,000.and normal rate of return is
10%.Calculate Goodwill
(a)

capitalisation of super profit.

(b)

at three years purchase of super profit.

capitalisation of average profit.

The assets of the business were Rs.10,00,000 and its external liabilities
Rs.1,80,000
CHANGE IN PROFIT SHARING RATIO
31.Why is it necessary to revalue assets and reassess liabilities of a firm in case of
reconstitution of partnership?
10

Ans. The assets are revalued and liabilities of a firm are reassess, at the time of
reconstitution of partnership because the new partner should; neither benefit nor
suffer because change in the value of assets and liabilities as on the date of
admission.
32.What journal entry is to be passed if profit & Loss Dr. balance appearing on the
asset side of Balance Sheet at the time of change in profit sharing ratio among
the existing partners A and B ,from 3:2 to 1:1.They decided not to distribute it.
Ans: (As Capital a/c Dr
To Bs Capital A/c)

33.Punit and Shikhar are partners sharing profits in the ratio of 3:2 R is admitted
with 1/5th share and brings Rs.84,000 as his share of Goodwill which is credited to
the capital accounts of P and S respectively with Rs.63,000 and Rs.21,000 .What
will be the new profit sharing ratio?
(Ans:9:7:4)

34.

X , Y and Z were sharing profits and losses in the ratio of 5 : 3 : 2. They


decided to share future profits and losses in the ratio of 2 : 3 : 5 with
effect from 1st April 2014. They decided to record the effect of the
following without effecting their book values:(i) profit and loss Account Rs.24,000.
(ii) Advertisement Suspense Account Rs.12,000.
Pass necessary adjusting journal entry.

Ans.11 Debit Z,s Capital A/c 3,600 and Credit Xs Capital A/c 3,600. Gaining
ratio of Z -1/10 and Sacrificing ratio of X 1/10.
35. A and B were partners in the ratio of 3:2. They admit C for 3/13 th share. New
profit ratio after Cs admission will be 5:5:3. C brought some assets in the form of
his capital and for the share of his goodwill.
Following were the assets:
Assets

Rs.

Stock

2,44,000

Building

2,40,000

Plant and Machinery

1,40,000

At the time of admission of C , goodwill of the firm was valued at Rs. 12,48,000.

11

Pass necessary journal entries.

36. X, Y and Z are sharing profits and losses in the ratio of 5:3:2. They decide to
share future profits and losses in the ratio of 2:3:5 with effect from 1 st April,
2002. They also decide to record the effect of the reserves without affecting their
book figures, by passing a single adjusting entry.

Book Figure
General Reserve

Rs. 40,000

Profit & loss A/C

Rs. 10,000

Advertisement Suspense A/C

Rs. 20,000

Pass the necessary single adjusting entry.

37.
A and B are partners in a firm Sharing profits and losses in the ratio
of 2 : 3 they decided to share future profits and losses equally with effect
from 1st April 2008. An extract of their Balance Sheet as at 31 st March
2008 is as follows:Liabilities
Workmen
Reserve

Amount
(Rs.)
Compensation 40,000

Assets

Amount
(Rs.)

Show the accounting treatment under the following alternative cases:Case (i) If there is no other information and
reserve.

partners want to transfer the

Case (ii) If a claim on account of Workmens Compensation is estimated at


Rs.25,000 and partners want to transfer the reserve.
Case(iii) If there is no other information and partners do not want to transfer
the reserve

Ans. Case (i) Credit As Capital A/c by Rs.16,000 and Bs Capital A/c by
Rs.24,000.
Case (ii) Credit As Capital A/c by Rs.6,000 and Bs Capital A/c by
Rs.9,000.and Balance showed a balance Workmens Compensation at the
liabilities side Rs.15,000.

12

Case (iii) As capital a/c

Dr. 4,000

To Bs capital A/c

4,000

38.
A ,B and C are partners in a firm Sharing profits and losses in the
ratio of 4 : 3 : 2 they decided to share future profits and losses in the ratio
of 2 : 3 : 4 with effect from 1st April 2008. An extract of their Balance
Sheet as at 31st March 2008 is as follows:Liabilities
Investment
Reserve

Amount
(Rs.)
Fluctuation 54,000

Assets
Investment
cost)

Amount
(Rs.)
(at 6,00,000

Show the accounting treatment under the following alternative cases:Case (i) If there is no other information.
Case (ii) If the market value of investment is Rs. 6,00,000.
Case (ii) If the market value of the Investment is 5,91,000.
Ans. Case (i) and Case (ii) Credit As Capital A/c by Rs. 24,000 , Bs Capital A/c
by Rs.18,000 and C,s Capital A/c by Rs.12,000.
Case (iii) Credit As Capital A/c by Rs.20,000 , Bs Capital A/c by Rs.15,000
and C,s Capital A/c by Rs.10,000.
39.

A and B are partners in a firm sharing profits in the ratio of 3 : 2. On 31 st


March 2003 their Balance Sheet showed a general Reserve of Rs. 54,000.
On that date they decided to admit C as a new partner. The new profit
sharing ratio among A , B and C will be 4 : 3 : 2. Record the necessary
journal entries in the books of the firm under the following
circumstances :-

(i) When they want to transfer general reserve in their capital Account.
(ii) When they dont want to transfer general reserve in their Capital Account
and prefer to record an adjustment entry for the same.
Ans.39 (i) General Reserve A/c Dr. Rs. 54,000 , Cr.As Capital A/c 32,400 and Bs
Capital A/c Rs.21,600
(ii) Dr. Cs Capital A/c 12,000 Cr. As Capita A/c 8,400 and Cr. Bs Capital
A/c 3,600.
40. A, B ,C and D are partners in a firrm sharing profits and losses in the ratio of
2:1:2:1.With effect from 1st April 2015 they decided to share future profits and
losses equally.The Goodwill of the firm is to be valued by capitalization method
assuming that the firm owns total assets worth Rs.5,00,000 including therein
cash of Rs.50,000 and the firm has to pay Rs.1,00,000 to the outside
liabilities.The firm has earned an average profit of Rs.55,000 during the last year
13

and the normal rate of return in similar type of business is 10%.At that time firm
had a balance of Rs.24,000 in General reserve.Firm does not want to distribute
General Reserve .Calculate the value of goodwill and give necessary journal
entry yo record it.
(Ans: Goodwill rs.1,50,000
Bs capital A/c.Dr.
14,500
Ds capital A/c.Dr.
14,500
To As Capital A/c
14,500
To Cs capital A/c
14,500

14