I want to know a logic how a goodwill can be measured in cash and especially of new partner and why its is called as a premium?
I can't understand anything.
Answers
Answer:
eaning
According to Section 31 of Indian Partnership Act 1932 "A Partner can be admitted only
consent of all the Existing Partners."
Adjustments required when a New Partner is Admitted
a. Calculation of New Profit Sharing Ratio / Sacrificing Ratio.
b. Valuation and Treatment of Goodwill.
c. Revaluation of Assets and Liabilities.
d. Adjustment of accumulated Profits, Reserve and Losses.
e. Necessary Adjustment of Capital Accounts of Partners.
Change in Profit Sharing Ratio
A New Partner Acquires his share from the Old Partner in any of the following Manners;
(i) In their old Profit Selling Ratio
(ii) In a Particular Ratio or Surrendered Ratio
(iii) In a particular fraction from some of the partner
Accounting Treatment of Goodwill
1. When Goodwill (Premium) is paid by No Entry
the New Partner Privately
2. When Goodwill brought in Cash by the (i) Cash/Bank A/c ...Dr.
New Partner To Premium for Goodwill A/c
(ii) Premium for Goodwill A/c ... Dr.
To Sacrificing Partners' Capital A/c
(In Sacrificing Ratio)
To Sacrificing Partners' Current A/c s
(When Capital is Fixed)
3. Goodwill Withdrawn by the Sacrificing Partners' Capital A/c s ...Dr.
Sacrificing (Old) Partners To Cash/Bank A/c
4. Goodwill not brought in Cash New Partner's Capital or Current A/c ... Dr.
To Sacrificing Partners' Capital or current A/c
[Sacrificing Ratio]
5. Goodwill brought in Kind Assets A/c ...Dr.
To Premium for Goodwill A/c