Gopal and Govind are partners sharing profits and losses in the ratio of 3: 2. The firm's Balance Sheet
as on 31.03.2023 was as follows.
Liabilities Rs. Assets Rs.
Capital Accounts: Fixed assets 3,00,000
Gopal 1,20,000 Investments 50,000
Govind 80,000 Current Assets 2,00,000
Long Term Loan 2,00,000 Loans and Advances 1,00,000
CurrentLiabilities 2,50,000
6,50,000 6,50,000
Due to financial difficulties, they have decided to admit Guru as a partner in the firm from
01.04.20X3 on the following terms:
(a) Guru will be paid 40% of the profits.
(b) Guru will bring in cash Rs.1,00,000 as Capital. It is agreed that Goodwill of the firm will be valued
at 2 years’ purchase of 3 years’ normal average profits of the firm and Guru will bring in his share of
Goodwill. It was also decided that partners will not withdraw their share of goodwill nor will the
goodwill appear in the books of account.
(c) The profits of the previous three years were as follows:
For the year ended 31.3.20X1 Profit Rs.20,000 (includes insurance claim received of Rs.40,000)
For the year ended 31.3 20X2 Loss Rs.80,000 (includes voluntary retirement compensation paid
Rs.1,10,000)
For the year ended 31.3.20X3 Profit Rs.1,05,000 (includes a profit of Rs.25,000 on the sale of Assets)
(d) It was decided to revalue the assets on 31.3.20X3 as follows:
Fixed Assets (net) Rs.4,00,000, Investment Nil. Current Assets Rs.1,80,000, Loans and advances
Rs.1,00,000.
(e) The new profit sharing ratio after the admission of Guru was 35: 25 : 40.
Pass Journal Entries on admission, show goodwill calculation and prepare Revaluation Account,
Partners’ Capital Accounts and Balance Sheet as on 01.04.20X3 after admission of Guru.
[CA.(Foundation),J
Answers
Step-by-step explanation:
First account is realization
second is partner's capital
third is balance sheet
I hope this will help you.
Answer:
Goodwill has not been shown in the Balance Sheet as it will not appear in the books of account.)
Step-by-step explanation:
Journal Entries:
To open Guru’s Capital Account:
Bank Account Dr. 1,00,000
To Guru’s Capital Account 1,00,000
To record Goodwill:
Gopal’s Capital Account Dr. [2/5 * (2 years’ purchase of 3 years’ average profit) * (3,000) / 2] = 1,800
Govind’s Capital Account Dr. [3/5 * (2 years’ purchase of 3 years’ average profit) * (3,000) / 2] = 2,700
To Goodwill Account 4,500
(Note: Goodwill account will not appear in the books of account.)
To transfer the revaluation gain:
Revaluation Account Dr. [4,00,000 – 3,00,000 + 1,80,000 – 50,000 + 1,00,000 – 1,00,000] = 2,30,000
To Fixed Assets Account 1,00,000
To Current Assets Account 80,000
To Govind’s Capital Account 23,000
To Gopal’s Capital Account 27,000
Calculation of Goodwill:
Average Profit = (20,000 – 80,000 + 1,05,000) / 3 = Rs. 15,000
2 years’ purchase of 3 years’ average profit = 2 * 3 * 15,000 = Rs. 90,000
Goodwill = Rs. 90,000 * (3/5) = Rs. 54,000
Revaluation Account:
Particulars Amount (Rs.) Amount (Rs.)
To Fixed Assets Account 1,00,000
To Current Assets Account 80,000
To Govind’s Capital Account 23,000
To Gopal’s Capital Account 27,000
Total 2,30,000
Partners’ Capital Accounts:
Particulars Gopal Govind Guru Total
Particulars Gopal Govind Guru Total
Opening Balance 1,20,000 80,000 - 2,00,000
Add: Share of Goodwill 1,800 2,700 - 4,500
Less: Share of Revaluation loss 27,000 23,000 - 50,000
Add: Profit share (35%) 36,750 26,250 42,000 1,05,000
Total 1,31,550 85,950 42,000 2,59,500
Balance Sheet as on 01.04.20X3:
Liabilities Amount (Rs.) Assets Amount (Rs.)
Capital Accounts: Fixed Assets 4,00,000
Gopal’s Capital Account 1,31,550 Investments Nil
Govind’s Capital Account 85,950 Current Assets 1,80,000
Guru’s Capital Account 42,000 Loans and Advances 1,00,000
Long Term Loan 2,00,000
Current Liabilities 2,50,000
Total 6,50,000 Total 6,50,000
(Note: Goodwill has not been shown in the Balance Sheet as it will not appear in the books of account.)
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