Question

Shiv and Shankar are partners in a firm sharing profits
and losses equally Their capital Accounts on 31st
December, 2012 stood at 85,000 RS. & 80,000Rs.
respectively after considering thee profit of year 2012
which amounted 50,000 Rs. Drawings of Shiv and Shankar for year 2012 were 8,000Rs. & 6,000Rs. respectively following items were noticed after the Accounts have been closed:
1. interest on drawings was to be changed for 6 months @ 10% p.a.
2. Partners were allowed interest on capital @ 10% p.a.
3. shiv was entitled to salary of 9000 RS. & Shankar a commission of 2000Rs. p.a.
It was decided to make necessary adjustments by a Journal entry. Give necessary
Journal entry.​

Answer 1

Answer:

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Class 12

>>Accountancy

>>Reconstitution of a Partnership Firm - Admission of a Partner

>>Accounting Treatment of Accumulated Profits and Losses and Reserves

>>X and Y are partners with capitals of Rs

Question

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X and Y are partners with capitals of Rs.50,000 each. They admit Z as a partner with 1/4

th

share in the profits of the firm. Z brings in Rs.80,000 as his share of capital. The Profit and Loss Account showed a credit balance of Rs.40,000 as on date of admission of Z.

Give necessary Journal entries to record the goodwill.

Easy

Solution

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Working Note:

Calculation of hidden goodwill:

Total Capital of the firm after admission= 50000+50000+80000+40000

= 220000

Total capital of the firm based on Z's capital= 80000 * 4/1

= 320000

Hidden goodwill= 320000-220000= 100000

Z's share of Goodwill= 100000 * 1/4= 25000

JOURNAL

1. Cash a/c..... Dr. 80000

To Z's Capital a/c 80000

(Being capital brought in by Z)

2. Z's Capital a/c... Dr. 25000

To X's Capital a/c 12500

To Y's Capital a/c 12500

(Being Z's share of goodwill distributed among the partners in the ratio of 1:1)