A, B and C at present share profits and losses in the ratio of 5:3:2. They decide to share future profits and losses equally w.e.f 1st April 2015. Goodwill of the firm has been valued at Rs. 90000.Show Journal entries under each of the following alternative cases:
Case 1. When no goodwill appears in the books
Case 2. When goodwill appears in the books at Rs. 90000​
Answers
ACCOUNTANCY
A, B and C are partners sharing profits and losses in the ratio of A
2
1
,B
10
3
,C
5
1
after providing interest @ 5% on their respective capitals, viz., A Rs. 50,000; B Rs. 30,000 and C Rs. 20,000 and allowing B and C a salary of Rs. 5,000 each per annum. During the year ended 31st March, 2018, A has drawn Rs. 10,000 and B and C in addition to their salaries have drawn Rs. 2,500 and Rs.1,000 respectively. The Profit and Loss Account for the year ended 31st March, 2018 showed a net profit of Rs. 45,000 before charging (a) interest on capital and (b) partners' salaries. On 1st April, 2017, the balances in the Current Accounts of the partners were A (Cr.) Rs. 4,500; B (Cr.) Rs. 1,500 and C (Cr.) Rs. 1,000. Interest is not charged on Drawings or Current Account balances. Show Partners' Capital and Current Accounts as at 31st March, 2018 after division of profits In accordance with the partnership agreement.
December 26, 2019avatar
Hitiksha Khanwe
SHARE
ANSWER
PROFIT AND LOSS APPROPRIATION ACCOUNT
Particulars Amount Particulars Amount
To Interest on capital
A= 50000*5%=2500
B=30000*5%=1500
C=20000*5%=1000 5000 By net profit 45000
To salary to
B= 5000
C=5000 10000
To profit T/f to
P's current A/c 15000
Q's current A/c 9000
R's current A/c 6000 30000
Total 45000 Total 45000
PARTNERS CAPITAL ACCOUNT
Particulars A B C Particulars A B C
To balance c/d 50000 30000 20000 By balance b/d 50000 30000 20000
Total 50000 30000 20000 Total 50000 30000 20000
PARTNERS CURRENT ACCOUNT
Particulars A B C Particulars A B C
To drawings
10000 7500 6000 By bal b/d 4500 1500 1000
By Interest on capital 2500 1500 1000
By bal c/d 12000 9500 7000 By Salaries 5000 5000
P/L Appropriation A/c 15000 9000 6000
Total 22000 17000 13000