Double
Entry Book Keeping Ts Grewal Volume-1 2021-22
Solutions
Class
12 Commerce Accountancy
Chapter 4 - Change In Profit
Sharing Ratio Among The Existing Partners
Page
No 4.40:
Question
6:
X, Y and Z
are partners sharing profits and losses in the ratio of 5 :
3 : 2. From 1st April, 2018, they decided to share profits and losses equally.
The Partnership Deed provides that in the event of any change in the
profit-sharing ratio, the goodwill should be valued at two years' purchase of
the average profit of the preceding five years. The profits and losses of the
preceding years ended 31st March, are:
|
Year |
2017 |
2018 |
2019 |
2020 |
2021 |
|
Profits
( `) |
70,000 |
75,000 |
55,000 |
35,000 |
10,000 (Loss) |
You
are required to calculate goodwill and pass journal entry.
Answer:
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit Amount ` |
Credit Amount ` |
|
|
April
1 |
Y’sCapitalA/c |
Dr. |
|
3,000 |
|
|
|
Z’s Capital A/c |
Dr. |
|
12,000 |
|
|
|
To X’s Capital
A/c |
|
|
|
15,000 |
|
|
(Amount of goodwill adjusted on change in
profit sharing ratio) |
|
|
|
|
|
|
|
|
|
|
|
Working Notes:
WN 1 Calculation of Sacrificing (or Gaining) Ratio
Old Ratio (X, Y and Z) = 5 : 3 : 2
New Ratio (X, Y and Z) = 1 : 1 : 1
Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio
X’s share=
5/10-1/3= 15-10/30= 5/30 (Sacrifice)
Y’s share=
3/10-1/3= 9-10/30= -1/30 (gain)
Z’s share= 1/10-1/3= 6-10/30= -4/30 (gain)
WN 2 Calculation of Goodwill
Goodwill= average × purchase years
Average profit= 70,000+75,000+55,000+35,000-10,000/5=45,000
Goodwill= 45,000×2=90,000
WN 3 Adjustment of Goodwill
Amount to be Credited to X’s capital=
90,000×5/30 = 15,000 (sacrifice)
Amount to be Credited to Y’s capital=
90,000×1/30 = 3,000 (Gain)
Amount to be Credited to Z’s capital= 90,000×4/30 = 12,000 (Gain)
Page
No 4.40:
Question
7:
Mandeep, Vinod and
Abbas are partners sharing profits and losses in the ratio of 3 : 2 : 1. From 1st April, 2019 they decided to share
profits equally. The Partnership Deed provides that in the event of any change
in profit-sharing ratio, goodwill shall be valued at three years' purchase of
average profit of last five years. The profits and losses of past five years
are:
Profit − Year ended 31st March, 2015 − ` 1,00,000; 2016 − ` 1,50,000; 2018 − ` 2,00,000; 2019 − ` 2,00,000.
Loss − Year ended 31st March, 2017 − `
50,000.
Pass the Journal entry showing the working.
Answer:
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit Amount ( `) |
Credit Amount ( `) |
|
|
2019 |
|
|
|
|
|
|
April 1 |
Abbas’s Capital
A/c |
Dr. |
|
60,000 |
|
|
|
To Mandeep’s Capital A/c |
|
|
|
60,000 |
|
|
(Being
Adjustment entry made for change in ratio) |
|
|
|
|
Working Notes:
WN1: Calculation of Sacrifice
or Gain
Mandeep :Vinod :Abbas=3:2:1(Old Ratio)
Mandeep :Vinod :Abbas=1:1:1(New Ratio)
Sacrificing (or Gaining Ratio) = Old Ratio - New Ratio
Mandeep's share=36−13=3−26=1/6 (Sacrifice)
Vinod's share=26−13=2−26=0
Abbas's share=16−13=1−2/6=−1/6(Gain)
WN2: Valuation of Goodwill
Goodwill=Average Profit×No. of years' Purchase
=1,20,000×3= ` 3,60,000
Average Profit=Total Profits of past years given/Number of years
=1,00,000+1,50,000+2,00,000+2,00,000−50,0005= ` 1,20,000
WN3: Adjustment of Goodwill
Amount debited to Abbas's Capital A/c=3,60,000×16= ` 60,000 (share of gain)
Amount credited to Mandeep's Capital A/c=3,60,000×16= ` 60,000 (share of sacrifice)
Page No 4.40:
Question 8:
A
and
B are partners in a firm sharing profits in the ratio of 2 : 1. They decided with effect from 1st April, 2018, that
they would share profits in the ratio of 3 : 2. But,
this decision was taken after the profit for the year ended 31st March, 2019 of ` 90,000 was distributed in the
old ratio.
The profits for the year ended 31st March, 2017 and 2018 were ` 60,000 and
`
75,000 respectively. It was decided that Goodwill Account will not be opened in
the books of the firm and necessary adjustment be made through Capital Accounts
which on 31st March, 2019 stood at ` 1,50,000 for A
and ` 90,000 for B.
Pass necessary Journal entries and prepare Capital Accounts.
Answer:
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit Amount ( `) |
Credit Amount ( `) |
|
|
2018 |
|
|
|
|
|
|
|
To B’s Capital A/c |
|
|
6,000 |
|
|
|
(Being Adjustment of profit for
2018-19 on change in profit sharing ratio) |
|
|
|
|
|
|
|
|
|
|
|
|
April
1 |
B’s Capital A/c |
Dr. |
|
9,000 |
|
|
|
To A’s Capital
A/c |
|
|
9,000 |
|
|
|
(Being Adjustment of goodwill made on
change in profit sharing ratio) |
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ Capital Accounts |
|||||
|
Dr. |
|
|
|
|
Cr. |
|
Particulars |
A |
B |
Particulars |
A |
B |
|
B's Capital A/c |
6,000 |
– |
Balance b/d |
1,50,000 |
90,000 |
|
(Adjustment of profit) |
|
|
A's Capital A/c |
– |
6,000 |
|
A's Capital A/c |
– |
9,000 |
(Adjustment Profit) |
|
|
|
(Adjustment of Goodwill) |
|
|
B's Capital A/c |
9,000 |
– |
|
Balance c/d |
1,53,000 |
87,000 |
(Adjustment of Goodwill) |
|
|
|
|
1,59,000 |
96,000 |
|
1,59,000 |
96,000 |
|
|
|
|
|
|
|
Working Notes:
WN 1 Calculation of Sacrificing (or Gaining) Ratio
Old Ratio (A and B) = 2 : 1
New Ratio (A and B) = 3 : 2
Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio
A’s share=
2/3-3/5= 10-9/15= 1/15 (Sacrifice)
A’s share= 2/3-3/5= 5-6/15= -1/15 (gain)
WN 2 Adjustment of Profit for 2016-17
Profit to be debited to A’c capital=90,000×1/15=6,000
Profit to be credited to B’c capital=90,000×1/15=6,000
WN 3 Calculation of New Goodwill
Goodwill=Profit of 2014-15 +
Profit of 2015-16
=60,000+75,000= ` 1,35,000
WN 4 Adjustment of Goodwill
Goodwill to be debited to A’c capital=1,35,000×1/15=9,000 (share of
sacrifice)
Goodwill to be credited to B’c capital=1,35,000×1/15=9,000 (share of Gain)
Page No 4.40:
Question 9:
Nisha and Anand are partners in a
firm sharing profits and losses in the ratio of 3 : 2.
With effect from 1st April, 2019, they decided to share future profits equally.
On the date of change in the profit-sharing ratio, the Profit and Loss Account
showed a credit balance of ` 1,50,000. Record the necessary Journal entry
for the distribution of the balance in the Profit and Loss Account immediately
before the change in the profit-sharing ratio.
Answer:
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit Amount ( `) |
Credit Amount ( `) |
|
|
2019 |
|
|
|
|
|
|
|
To Nisha’s Capital A/c |
|
|
|
90,000 |
|
|
To Anand’s Capital A/c |
|
|
|
60,000 |
|
|
(Being
Adjustment of balance in P&L A/c in old ratio) |
|
|
|
|
Working Notes:
WN1 Calculation of
Share of Profit and Loss A/c
Nisha's share=1,50,000×35=90,000
Anand's share=1,50,000×25=60,000
Page No 4.40:
Question 10:
Om and Shiv are partners in a firm
sharing profits in the ratio of 4 : 1. They decided to
share future profits in the ratio of 3 : 2 w.e.f. 1st April, 2019. On that day,
Profit and Loss Account showed a debit balance of ` 1,00,000. Pass Journal
entry to give effect to the above.
Answer:
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit Amount ( `) |
Credit Amount ( `) |
|
|
2019 |
|
|
|
|
|
|
April 1 |
Om’s Capital A/c |
Dr. |
|
80,000 |
|
|
|
Shiv’s
Capital A/c |
Dr. |
|
20,000 |
|
|
|
To Profit & Loss A/c |
|
|
|
1,00,000 |
|
|
(Being Profit
& Loss distributed) |
|
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