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12th | Change in Profit Sharing Ratio Among the Existing Partner | Question No. 6 To 10 | Ts Grewal Solution 2023-2024

Question 6:


Asha, Nisha and Disha shared profits and losses in the ratio of 3 : 2 : 1 respectively. With effect from 1st April, 2023, they agreed to share profits equally. The goodwill of the firm was valued at  ` 18,000. Pass necessary Journal entries when:

 

Answer:

 

Calculation of Gain/Sacrifice made by the partners:

Particulars

Asha

Nisha

Disha

Old Ratio

3/6

2/6

1/6

New Ratio

1/3

1/3

1/3

Gain/Sacrifice

1/6 (Sacrifice)

Nil

-1/6 (Gain)

 

 

Journal

 

Date

Particular

L.F.

Debit
(
`)

Credit
(
`)

2023

April 1

 

Disha’s Capital A/c (18,000×1/6)

 

Dr.

 

 

3,000

 

 

To Asha’s Capital A/c (18,000×1/6)

 

 

3,000

 

(Being Adjustment for goodwill)

 

 

 

 

Question 7:


X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. From 1st April, 2023, 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

 2018

2019

2020

 2021

2023

 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

`

Credit

`

2023

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)

Question : 8.


 Ram,Laxman and Bharat who were sharing profits and losses in the ratio of 5 :3: 2, decide to share profits and losses equally with effect from 1st April, 2023. Goodwill of the firm is valued at Rs. 4,50,000. Goodwill is appearing in the books is at 75,000.

Pass necessary Journal entries to record the above change.

Answer:

Journal

Date

Particulars

L.F.

Debit

   `

Credit

   `

 

Ram's Capital A/c

Dr.

 

37,500

 

 

Laxman's Capital A/c

 

 

22,500

 

 

Bharat's Capital Ac

 

 

15,000 

 

To Goodwill A/c

 

 

 

75,000

 

(goodwill written off)

 

 

 

 

 

Laxman's Capital A/c

Dr.

 

15,000

 

 

Bharat's Capital A/c

 Dr.

 

60,000 

 

 

To Ram's Capital A/c by

 

 

 

75,000

 

(For Adjustment of Goodwill)

 

 

 

 

 

 

 

 

 

 

Working notes:

 

1. Gaining and sacrificing ratio;

Ram

= 5/10-1/3

=15+10/30

=5/30

 

 

Laxman

= 3/10-1/3

=9+10/30

= -1/30

 

 

Bharat

=2/10-1/3

=6-10/30

= -4/30

 

2. Share of each partner in goodwill for compensating;

Ram = 4,50,000×5/30 =75,000

Laxman =4,50,000×1/30 = 15,000

Bharat =4,50,000×4/30 = 60,000

 

 

Adjustment of Goodwill by Raising and Writing off Goodwill

Question 9:


A and B are partners in a firm sharing profits in the ratio of 2 : 1. They decided with effect from 1st April, 2022, 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, 2022 of  ` 90,000 was distributed in the old ratio.
The profits for the year ended 31st March, 2021 and 2022 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, 2023 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

 ( `)

Credit

 ( `)

2023
April 1


A’s Capital A/c


Dr.

 


6,000

 

 

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 2020 + Profit of 2021

=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)

Question 10:


 . Arun, Varun and Tarun are partners sharing profts and losses in the ratio of 3 :2:1. They decide to share prof

and losses equally with effect from 1st April, 2023. Goodvwill of the firm is valued at 1,20,000.

Pass Journal entries when goodwill is raised and written off.

 

Answer:

Journal

Date

Particulars

L.F.

Debit

   `

Credit

   `

 

Goodwill A/c

Dr.

 

1,20.000

 

 

To Arun's Capital A/c

 

 

 

60,000

 

To Varuns Capital A/c

 

 

 

40,000

 

To Tarun's Capital A/c

 

 

 

20,000

 

(Being Goodwill is Raised)

 

 

 

 

 

Arun's Capital A/c

 

 

40,000

 

 

Varuns Capital A/c

 

 

40,000

 

 

Tarun's Capital A/c

 

 

40,000

 

 

To Goodwill A/c

 

 

1,20,000

 

(Being Goodwill is written off)

 

 

 

 

 

 

 

 

 

Working Note;

1.  Goodwill is raised as follow

Arun= 1,20.000×3/6 =60,000

Varun=1,20.000×2/6 =40,000

Tarun=1,20.000×1/6 =20,000

 

2. When Goodwill is written off as follow

Arun= 1,20.000×1/3 =40,000

Varun= 1,20.000×1/3 =40,000

Tarun= 1,20.000×1/3 =40,000

 

 

Ts Grewal Solution 2023-2024

Click below for more Questions

Class 12 / Volume – I

Chapter 3 – Change in Profit-Sharing Ratio Among the Existing Partner

 

Question No. 1 To 5
Question No. 6 To 10
Question No. 11 To 15
Question No. 16 To 20
Question No. 21 To 25
Question No. 26 To 30

Question No. 31 To 33