46. Aman commenced business with a capital of 2,50,000 on 1st April, 2015. During the five years en
Pass necessary Journal entries in the books of
31st March, 2020, the following profits and losses were made:
31st March, 2016-Loss 5,000
31st March, 2019-Profit 20,000
31st March, 2017--Profit 13,000
31st March, 2020-Profit * 25,000
31st March, 2018-Profit * 17,000
During this period he had drawn * 40,000 for his personal use. On 1st April, 2020, he admitted Bora
into partnership on the following terms:
Boman to bring for his half share in the business, capital equal to Aman's Capital on 31st March, 20
and to pay for the one-half share of goodwill of the business, on the basis of three times the averas
profit of the last five years. Prepare the statement showing what amount Boman should invest to becom
a partner and pass entries to record the transactions relating to admission.
n of Assets and Reassement of Liabilities
Answers
Journal entry is the business transaction record in the accounting books of a firm.
Working Notes -
Capital as on April,1 2015 = Rs. 2,50,000
Less: Loss on 31st March, 2016 = ( 5000)
Add: Profit on 31st March, 2017 = 13,000
Add: Profit on 31st March, 2018 = 17,000
Add: Profit on 31st March, 2019 = 20,000
Add: Profit on 31st March, 2020 = 25,000
= 3,20,000
Drawings = 40,000
Therefore, Capital as on March 31st, 2020= 3,20,000 - 40,000
= 2,80,000
Average profit of Aman = ( -5000 + 13000 + 17000 + 20000 + 25000) /5
= 3,20,000
= 14000
Goodwill = 14000 × 3
= 42000
B's share of Goodwill = 42000 × 1/2
= 21, 000
B's Capital = A's Capital = 2,80,000
Journal entries will be -
Cash A/c Dr. 3,01,000
To B's Capital A/c 2,80,000
To Premium for Goodwill A/c 21,000
(Being capital and premium for goodwill brought in by B)
Premium for Goodwill A/c Dr. 21,000
To A's Capital A/c 21,000
(Being premium for goodwill transferred to A's Capital account)
Answer:
Explanation:
Working Notes -
Capital as on April,1 2015 = Rs. 2,50,000
Less: Loss on 31st March, 2016 = ( 5000)
Add: Profit on 31st March, 2017 = 13,000
Add: Profit on 31st March, 2018 = 17,000
Add: Profit on 31st March, 2019 = 20,000
Add: Profit on 31st March, 2020 = 25,000
= 3,20,000
Drawings = 40,000
Therefore, Capital as on March 31st, 2020= 3,20,000 - 40,000
= 2,80,000
Average profit of Aman = ( -5000 + 13000 + 17000 + 20000 + 25000) /5
= 3,20,000
= 14000
Goodwill = 14000 × 3
= 42000
B's share of Goodwill = 42000 × 1/2
= 21, 000
B's Capital = A's Capital = 2,80,000
Journal entries will be -
Cash A/c Dr. 3,01,000
To B's Capital A/c 2,80,000
To Premium for Goodwill A/c 21,000
(Being capital and premium for goodwill brought in by B)
Premium for Goodwill A/c Dr. 21,000
To A's Capital A/c 21,000
(Being premium for goodwill transferred to A's Capital account)