Ncert Solutions For Class 12 Accountancy Chapter 2 Reconstitution Of A Partnership Firm Admission Of A Partner

Class 12 accountancy chapter 2 exercise solutions: Accountancy Class 12 Chapter 2 questions and answers

Textbook	NCERT
Class	Class 12
Subject	Accountancy
Chapter	Chapter 2
Chapter Name	Reconstitution of a Partnership Firm Admission of a Partner class 12 ncert solutions
Category	Ncert Solutions
Medium	English

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Short Answer Questions

Question 1: Identify various matters that need adjustments at the time of admission of a new partner.

Answer 1: At the time of admitting a new partner into a partnership firm, several adjustments are required to ensure smooth integration and fairness among the partners. These include:

Valuation of Assets and Liabilities: The firm must revalue its assets and reassess liabilities to determine their current market value. This ensures that the new partner is not unfairly advantaged or disadvantaged.
Calculation of Goodwill: Goodwill must be valued to compensate existing partners for their past efforts in building the business. The new partner may need to contribute their share of goodwill in cash or kind.
Adjustment of Capital Accounts: Partners’ capital accounts might need rebalancing to reflect the new partner’s capital contribution and ensure equity in profit-sharing.
Profit-Sharing Ratio: The profit-sharing ratio among all partners, including the new one, needs to be agreed upon and documented in the partnership deed.
Reserves and Accumulated Profits: Existing reserves and accumulated profits must be distributed among the old partners before the admission of the new partner to maintain fairness.
Amendment to the Partnership Deed: A new partnership deed must be drafted to include the rights, duties, liabilities, and profit-sharing ratio of the new partner.

Question 2: Why it is necessary to ascertain new profit sharing ratio even for old partners when a new partner is admitted?

Answer 2: At the time of admission of a new partner, the existing partners sacrifice their present profit-sharing ratio to make way for a share in profit sharing to the new partner, which results in reducing their profit. Therefore, it is essential to determine the new profit-sharing ratio for old partners on the occasion of adding a new partner, as it creates a more justified share of profit.

Question 3: What is sacrificing ratio? Why is it calculated?

Answer 3: Sacrificing ratio refers to the ratio in which the old partners of a partnership firm surrender their share of profit in favour of the new partner/s. It is calculated as a difference between the old ratio and the new ratio of the old partners.

Sacrificing Ratio = Old Ratio − New Ratio

It is very important to calculate this ratio, as the new partner need to compensate the old partners for sacrificing their share of profit. The new partner compensates the old partners by making payment to them in the form of goodwill that is transferred among the old partners in their sacrificing ratio.

Question 4: On what occasions sacrificing ratio is used?

Answer 4: The calculation of the sacrificing ratio is made during the time of the admission of the new partner and it is referred to as the difference between the old and the new share of the profit of the existing partners of the firm. The profit sharing ratio of the partners is calculated between the old partners and the new partners.

Thus the sacrificing ratio is used when the old partners decide to change the profit-sharing ratio. The second case is when new partners bring goodwill with them; it is transferred among the old partners sacrificing the ratio of the old partners.

Question 5: If some goodwill already exists in the books and the new partner brings in his share of goodwill in cash, how will you deal with existing amount of goodwill?

Answer 5: If goodwill already appears in the books of old firm (before the admission of new partner), then this will be written off among the old partners in their old profit sharing ratio. The following Journal entry is passed.

Old Partner’s Capital A/c Dr.

To Goodwill A/c

(Goodwill written off in old ratio among the old partners)

Question 6: Why there is need for the revaluation of assets and liabilities on the admission of a partner?

Answer 6: When a new partner gets admitted to the firm, there is a need to revalue the Liabilities and Assets of the firm to determine the true value on that day. Revaluation is helpful as the value of Liabilities and Assets may increase or decrease, and as such, their values in the old balance sheet may not be justified; also, some assets or liabilities may not be recorded at all. Hence, for recording the changes in market value for the Liabilities and Assets, a revaluation account is to be prepared, and the associated profits or losses need to be distributed between the existing partners of the firm.

Long Answer Questions

Question 1: Do you advise that assets and liabilities must be revalued at the time of admission of a partner? If so, why? Also describe how is this treated in the book of account?

Answer 1: It is logical to revalue Liabilities and Assets when a new partner gets admitted to the firm, as it is helpful in determining their true value of them on that day. Revaluation is helpful as the value of Liabilities and Assets may increase or decrease, and as such, their values in the existing balance sheet may not be justified; also, some assets or liabilities may not be recorded at all. Hence, for recording the changes in market value for the Liabilities and Assets, a revaluation account is needed to be prepared, and the associated profits or losses need to be distributed between the existing partners of the firm.

Following journal entries are added to the account on the date a new partner is admitted to a firm.

i. When asset value increases:

Assets A/c Dr.

To Revaluation A/c

(For increase in asset value)

ii) When asset value decreases.

Revaluation A/c		Dr.
	To Asset A/c
(For Decrease in asset value)

iii) When Liabilities increase.

Revaluation A/c		Dr.
	To Liabilities A/c
(For increase in liabilities value)

iv) When liabilities decrease.

Liability A/c		Dr.
	To Revaluation A/c
(For decrease in liabilities value)

v) To record assets that are unrecorded.

Unrecorded Assets A/c		Dr.
	To Revaluation A/c
(Recording unrecorded assets)

vi) To record liabilities that are unrecorded.

Revaluation A/c		Dr.
	To Unrecorded Liabilities A/c
(To record unrecorded liabilities)

vii) Transferring credit balance of Revaluation account.

Revaluation		Dr.
	To Old Partner’s Capital A/c
(Transfer of profit earned from Revaluation to Old Partners as per existing profit sharing ratio)

vii) Transferring debit balance of Revaluation account.

Old Partner’s Capital A/c		Dr.
	To Revaluation A/c
(Transfer of loss on revaluation to Old Partners as per existing profit sharing ratio)

Question 2: What is goodwill? What factors affect goodwill?

Answer 2: What is Goodwill?

Goodwill is an intangible asset representing the reputation, brand value, customer loyalty, and other non-physical factors that contribute to a business’s profitability. It reflects the ability of a business to earn higher profits compared to other similar businesses. Goodwill typically arises during the sale of a business or the admission of a new partner.

Factors Affecting Goodwill:

Nature of Business: A business offering unique or high-demand products/services usually has higher goodwill.
Location: A business situated in a prime or easily accessible location tends to attract more customers, enhancing goodwill.
Reputation and Brand Value: A well-established brand with a positive market reputation enjoys higher goodwill.
Customer Base and Loyalty: A strong, loyal customer base contributes significantly to goodwill, ensuring consistent revenue.
Profitability and Financial Performance: Businesses with consistent and high profitability tend to have greater goodwill.
Efficiency of Management: Skilled management and efficient operations enhance the business’s overall value and goodwill.
Market Conditions: Favorable market conditions or industry trends can increase goodwill.
Length of Establishment: Older, well-established businesses often have higher goodwill due to their stability and recognition in the market.

Question 3: Explain various methods of valuation of goodwill.

Answer 3: The following are the various methods of valuation of goodwill.

1. Average Profit Method: Under this method, goodwill is calculated on the average basis of the profits of past few years. The formula for calculating goodwill is:

Goodwill = Average Profit × No. of Years Purchase

Average Profit = `”Total Profit of Past Given Years”/”Number of Years”`
Number of Years Purchase implies number of years for which the firm expects to earn the same amount of profits.

Steps to Calculate Goodwill by Average Profit Method:
Step 1: Ascertain the total profit of past given years.
Step 2: Add all abnormal losses like, loss by fire, theft etc.
Step 3: Add all normal income, if not added previously.
Step 4: Less all non-business incomes and all abnormal gains and incomes like, speculation, lottery etc.
Step 5: Less all normal expenses, if not deducted previously.
Step 6: Calculate Average Profit, by dividing the total profit ascertained in Step 5 by number of years.
Step 7: Multiply the Average Profit to the Number of Year’s Purchases to calculate the value of goodwill.

Example:
The profits for last 5 years are 1,00,000, 3,00,000, (2,00,000), 5,00,000, 8,00,000.
Calculate goodwill on the basis of 4 years purchase

Average Profit = `[1,00,000 + 3,00,000 + 5,00,000 + 8,00,000 – 2,00,000]/5`
= `[15,00,000]/5` = Rs. 3,00,000

Goodwill = 3,00,000 x 4 years = Rs. 12,00,000.

2. Weight Average Method: It is modified version of the Average Profit Method. Under this method, the weights are assigned for each year’s profit. Highest weights are assigned to the recent year’s profit and lower weights are assigned to the past year’s profits. The products of the profits and the weights are added and divided by the total weights to calculate Weighted Average Profits. The formula for calculating goodwill by this method is:
Weighted Average Profit = `”Total Products of Profits”/”Total of Weights”`

Goodwill = Weighted Average Profit x Number of Years Purchase

Steps to Calculate Goodwill by Weight Average Method:
Step 1: Assign highest weights to the recent year’s profit and lower weights to the past year’s profits, like 4,3,2,1.
Step 2: Multiply the weights with its corresponding year’s profits.
Step 3: Calculate the total of the products
Step 4: Divide the total of the product by the total of the eights in order to calculate Weighted Average Profit.
Step 5: Multiply the Weighted Average Profit by the number of years purchase.

For example:
The profits for the last 5 years are Rs 1,00,000, Rs 3,00,000, Rs (2,00,000), Rs 5,00,000, Rs 8,00,000.
Calculate goodwill on the basis of 4 years purchase

Profit/LossRs	Weights	ProductRs
1,00,000	1	1,00,000 × 1 = 1,00,000
3,00,000	2	3,00,000 × 2 = 6,00,000
(2,00,000)	3	(2,00,000) × 3 = (6,00,000)
5,00,000	4	5,00,000 × 4 = 20,00,000
8,00,000	5	8,00,000× 5 = 40,00,000
Total	15	Rs 61,00,000

Weighted Average Profit = `61,00,000/15` = Rs. 4,06,666.67

Goodwill = 4,06,666.67 x 4 = Rs. 16,26,668.

3. Super Profit Method: Under this method, goodwill is calculated on the basis of excess profit earned by a firm over the normal profit earned by its counterparts in the same industry. The excess profit over the normal profit is termed as Super Normal Profit.

Steps to Calculate Goodwill by Super Profit Method:
Step 1: Calculate Average Profit
Step 2: Calculate Average Capital Employed as:

Average Capital Empolyed = `”Opening Capital Employed” + “Closing Capital Employed”/2`

Step 3: Calculate Normal Profit by the formula:

Normal Profit = Average Capital empolyed x `”Normal Rate of Return”/100`

Step 4: Calculate Super Normal Profit by the formula:
Super Normal Profit = Average Profit – Normal Profit

Step 5: Multiply the Super Normal Profit by the Number of Years Purchase to calculate goodwill.

4. Capitalisation Method: Under this method, goodwill is calculated by the following two methods :
a) By capitalisation of Average Profit.
b) By capitalisation of Super Profit.

a) Capitalisation of Average Profit
Step 1: Calculate Average Profit
Step 2: Calculate Capitalised value of Average Profit by the following formula:

Capitalised value of Average Profit = Average Profit x `100/”Normal Rate of Return”`

Step 3: Ascertain Actual Capital Employed
Step 4: Deduct Actual Capital Employed from Capitalised Average Profit to calculate goodwill.
Goodwill = Capitalised Average Profit – Actual Capital Employed

b) Capitalisation of Super Profit
Step 1: Calculate the Capital Employed
Step 2: Calculate Normal Profit by the following formula:

Normal Profit = Average Capital Employed x “Normal Rate Of Return”/100`

Step 3: Calculate Average Profit.
Step 4: Calculate Super Normal Profit by the following formula:
Super Normal Profit = Average Profit – Normal Profit
Step 5: Calculate goodwill by the following formula:

Goodwill = Super Profit x `100/”Normal Rate Return”`

Question 4: If it is agreed that the capital of all the partners should be proportionate to the new profit sharing ratio, how will you work out the new capital of each partner? Give examples and state how necessary adjustments will be made.

Answer 4: When a new partner is admitted, sometimes it is agreed that the capital of all the partners should be proportionate to the new profit sharing ratio. The calculation of the new capital of each partner depends on the following situations:

(i) When the capital of the new partner is given
(ii) When the total capital of the firm is given.

(i) When the capital of the new partner is given: In this situation, the calculation of the new capital of all the partners includes the following steps:

Step 1: The total capital of the new firm is calculated on the basis of new partner’s capital.

Step 2: The new capital of each partner is calculated by dividing the total capital of the firm by their individual new profit share.

Step 3: After posting all adjustments and items in the Partners’ Capital Account, calculate credit minus debit side of the old Partners’ Capital Account.

Step 4: The new capital ascertained in the Step 2 is written as ‘Balance c/d’ on the credit side of the Partner’s Capital Account.

Step 5: If the amount ascertained in Step 2 (New capital) exceeds the capital amount ascertained in Step 3 (Old Capital), then it is termed as ‘Deficit’ and the difference amount is to be brought in by the old partners. On the other side, if the amount ascertained in the Step 2 (New Capital) is lesser than the capital amount ascertained in the Step 3 (old Capital), then it is termed as ‘Surplus’ and the difference amount is returned to the old partners.

Let us understand the above steps with the help of an example.

P and Q are partners sharing profit and loss equally. They agree to admit R for 1/3rd share in profit. R brings ₹50,000 as capital. The old capitals of P and Q are ₹60,000 and ₹40,000 respectively, at the time admission of R.

Step 1: The total capital of the new form on the basis of

R = 50,000 × 1/3 = ₹50,000

Step 2:

P new capital = 1,50,000 × 1/3 = ₹50,000
Q share in new form = 1,50,000 × 1/3 = ₹50,000

Step 3:

	A	B
New Capital	100,000	100,000
Less: Existing Capital	(80,000)	(60,000)
Withdrawal (deposit)	(20,000)	(40,000)

(ii) When the total capital of the new form is given: When the capital of new partner is not mentioned then his/her capital is calculated on the proportionate basis of total capital of the firm. The amount ascertained is to be brought in by the new partner in the form of his/her portion of capital. In order calculated the proportionate capital of the new partner, the following steps are to be followed:

Step 1: Calculate the total old capital of the old partners (after making all adjustments).

Step 2: Calculate the total capital of the new firm by multiplying the total of old capitals of the old partners (ascertained in the Step 1) with reciprocal of total share of old partners. That is,
Total Capital of New Firm = Total Capital of the Old Partners
× Reciprocal of the Combined New Share of the Old Partners

Step 3: Calculate New Capital of each partner on the basis of Total Capital ascertained in Step 2. That is, multiplying the Total Capital by the new profit sharing ratio individually for all the partners (including the new partner).
Let us understand the above steps with the help of an example.

P and Q are partners in a firm sharing profit and loss equity. They agree to admit R for 1/3rd in profit and decided to share future profit and loss equally P capital is ₹2,00,000 and Q capital is ₹1,50,000, R brings sufficient capital for his share in profit.

Step 1: Calculation of Total Capital of Old Partners (after all adjustments)

The total capital of the old partners = ₹2,00,000 + ₹1,50,000 = ₹3,50,000

Step 2: Calculation of Total Capital of New Firm

Total Capital of New Firm = Total Capital of the Old Partners
× Reciprocal of the Combined New Share of the Old Partners

Total Capital of New Firm = 3,50,000 × 3/2 = ₹5,25,000

Step 3: Calculation of New Capital of Each partner

P(New)Capital = 5,25,000 × 1/3 = ₹1,75,000
Q(New)Capital = 5,25,000 × 1/3 = ₹1,75,000
R Capital = 5,25,000 × 1/3 = ₹1,75,000

Question 5: Explain how will you deal with goodwill when new partner is not in a position to bring his share of goodwill in cash.

Answer 5: During the time of the admission of any new partner, it is sometimes decided that the capital of all the partners of the organisation must be made in proportion to the new incoming partner.

The calculation of the new capital of each partner is reliant upon the below-given conditions

When the capital of the new partner is given
When the total capital of the firm is given

Question 6: Explain various methods for the treatment of goodwill on the admission of a new partner?

Answer 6: Goodwill is treated in the following ways on the introduction of a new partner:

1. Premium Method

2. Revaluation Method

When a new partner pays the share of goodwill in the form of cash, it is called a premium method. There can be two scenarios:

1. New partners pay directly to old partners

2. Partner brings goodwill in the form of cash, and it is retained in the business.

The corresponding entries are:

(i) When goodwill brought in cash by the new partner

Cash/Bank A/c Dr.

To Premium for Goodwill A/c

(Amount of goodwill brought in by new partner)

(ii)When goodwill is retained by the business:

Premium for Goodwill A/c Dr

To Sacrificing Partners’ Capital A/c

(Goodwill brought by the new partner is distributed among old partners as per the sharing ratio.)

Revaluation Method: Situations when a new partner is unable to bring goodwill in the form of cash.

New Partner’s Capital A/c Dr. (Goodwill amount not brought by new partner)

To Old Partners’ Capital A/c

(Goodwill of new partner distributed to old partners as per their sharing ratio.)

Note: According to Para 16 of Accounting Standard 10, Goodwill is recorded only when it is any transaction equivalent to money or money’s worth. It is a mandatory practice that is followed.

Question 7: How will you deal with the accumulated profits and losses and reserves on the admission of a new partner?

Answer 7: When a new partner is admitted in a partnership firm, then all past accumulated profits or losses and reserves are distributed among all the old partners in their old profit sharing ratio. This is because these profits and losses are attributable to the hard work and labours of the old partners and consequently, the old partners are liable to bear past losses or profits, if any. The new partner is not entitled for a share in these profits as he/she did not contribute anything for the past performance of the business.

Accounting Treatment of Accumulated Profits and Losses

i) For distributing accumulated profits and reserves
Profit and Loss A/c Dr.
General Reserve A/c Dr.
Reserve Fund A/c Dr.
Workmen’s Compensation Fund A/c Dr.
Contingency Reserve A/c Dr.
To Old Partners’ Capital A/c
(Undistributed profits and reserves are distributed among old partners in their old profit sharing ratio)

ii) For distributing accumulated losses
Old Partners’ Capital A/c Dr.
To Profit and Loss (Debit balance) A/c
To Deferred Advertisement Expenses A/c
To Preliminary Expenses A/c
(Undistributed losses are distributed among old partners in their old profit sharing ratio)

Question 8: At what figures the value of assets and liabilities appear in the books of the firm after revaluation has been due. Show with the help of an imaginary balance sheet.

Answer 8: After revaluation has been done, the assets and liabilities appear at their current market values in the Balance Sheet of the reconstituted firm. This can be better explained with the help of the below-explained example. A and B shares profit and loss equally.

Balance Sheet of A and B as on April 01, 2011
Liabilities	Amt (Rs.)	Assets	Amt (Rs.)
Sundry Creditors	1,00,000	Cash in Hand	8,000
Capital Accounts		Cash at Bank	28,000
A – 75,000	150,000	Cash at Bank	40,000
B – 75,000	150,000	Stock	36,000
		Furniture	38,000
		Plant and Machinery	1,00,000
	2,50,000		2,50,000

On that date C is admitted for 1/3^rd share and brings 1,00,000 as capital.
The value of stock is increased by Rs 7,000.
A provision of Rs 2,000 has been created against Debtors.
Furniture revalued at Rs 35,000.
A machinery costing Rs 50,000 purchased is not recorded in books.
Rent outstanding Rs 2,000.
Prepare Revaluation Account, Partners’ Capital Account, Cash Account and Balance Sheet.

Solution –

Dr.		Revaluation Account		Cr.
Particular		Amount (Rs.)	Particular	Amount (Rs.)
Rent Outstanding A/c		2,000	Stock	7,000
Provision for Debtors		2,000	Machinery	50,000
Furniture		35,000
Profit transferred:
A’s Capital A/c	25,000	50,000
B’s Capital A/c	25,000
		57,000		57,000

Dr.	A’s Capital Account						Cr.
Date	Particular	J.F.	AmountRs	Date	Particular	J.F.	AmountRs
	Balance c/d		1,00,000		Balance b/d		75,000
					Revaluation A/c		25,000
			1,00,000				1,00,000

Dr.	B’s Capital Account						Cr.
Date	Particular	J.F.	AmountRs	Date	Particular	J.F.	AmountRs
	Balance c/d		1,00,000		Balance b/d		75,000
					Revaluation A/c		25,000
			1,00,000				1,00,000

Dr.	C’s Capital Account						Cr.
Date	Particular	J.F.	AmountRs	Date	Particular	J.F.	AmountRs
	Balance c/d		1,00,000		Cash A/c		1,00,000
			1,00,000				1,00,000

Dr.	Cash Account						Cr.
Date	Particular	J.F.	AmountRs	Date	Particular	J.F.	AmountRs
	Balance b/d		8,000		Balance c/d		1,08,000
	C’s Capital A/c		1,00,000
			1,08,000				1,08,000

Balance Sheet of A, B & C as at April
Liabilities		Amount (Rs.)	Assets		Amount (Rs.)
Sundry Creditors		1,00,000	Cash in hand		1,08,000
Rent Outstanding		2,000	Cash at Bank		28,000
			Debtors	40,000	38,000
			Less: Provision	2,000
Capital Account
A	1,00,000	3,00,000	Stock		43,000
B	1,00,000		Furniture		35,000
C	1,00,000		Plant and Machinery		1,50,000
		4,02,000			4,02,000

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Numerical Questions

Question 1: A and B were partners in a firm sharing profits and losses in the ratio of 3:2. They admit C into the partnership with 1/6 share in the profits. Calculate the new profit sharing ratio?

Answer 1: Calculation of New Profit-Sharing Ratio

Given:

A and B are partners sharing profits in the ratio of 3:2.
C is admitted with a 1/6 share in the profits.

Steps to Calculate the New Ratio:

Determine the Remaining Share of A and B

Total profit = 1 (or 6/6).
C’s share = 1/6.
Remaining share for A and B = 1 – 1/6 = 5/6.

Distribute the Remaining Share Between A and B

A and B will share the remaining 5/6 in their old ratio of 3:2.
A’s share = \( \frac{3}{5} \times \frac{5}{6} = \frac{15}{30} = \frac{1}{2} \).
B’s share = \( \frac{2}{5} \times \frac{5}{6} = \frac{10}{30} = \frac{1}{3} \).

Include C’s Share

New profit-sharing ratio:
A : B : C = \( \frac{1}{2} : \frac{1}{3} : \frac{1}{6} \).

Convert to a Common Denominator

A : B : C = \( \frac{15}{30} : \frac{10}{30} : \frac{5}{30} \).
Simplify to: 15:10:5 or 3:2:1.

The new profit-sharing ratio is 3:2:1.

Question 2: A,B,C were partners in a firm sharing profits in 3:2:1 ratio. They admitted D for 10% profits. Calculate the new profit sharing ratio?

Answer 2: Calculation of New Profit-Sharing Ratio

Given:

A, B, and C are partners sharing profits in the ratio of 3:2:1.
D is admitted with a 10% (or 1/10) share in profits.

Steps to Calculate the New Ratio:

Determine the Remaining Share for A, B, and C

Total profit = 1 (or 100%).
D’s share = 10% = 1/10.
Remaining share for A, B, and C = 1 – 1/10 = 9/10.

Distribute the Remaining Share Between A, B, and C

A, B, and C will share the remaining 9/10 in their old ratio of 3:2:1.
Total of the old ratio = 3 + 2 + 1 = 6 parts.
A’s new share = \( \frac{3}{6} \times \frac{9}{10} = \frac{27}{60} \).
B’s new share = \( \frac{2}{6} \times \frac{9}{10} = \frac{18}{60} \).
C’s new share = \( \frac{1}{6} \times \frac{9}{10} = \frac{9}{60} \).

Include D’s Share

D’s share = \( \frac{1}{10} = \frac{6}{60} \).

Combine All Shares

A : B : C : D = \( \frac{27}{60} : \frac{18}{60} : \frac{9}{60} : \frac{6}{60} \).

Simplify the Ratio

A : B : C : D = 27 : 18 : 9 : 6.
Simplified ratio = 9 : 6 : 3 : 2.

The new profit-sharing ratio is 9:6:3:2.

Question 3: X and Y are partners sharing profits in 5:3 ratio admitted Z for 1/10 share which he acquired equally for X and Y. Calculate new profit sharing ratio?

Answer 3: Calculation of New Profit-Sharing Ratio

Given:

X and Y share profits in the ratio of 5:3.
Z is admitted with a \( \frac{1}{10} \) share in profits.
Z acquires this share equally from X and Y.

Steps to Calculate the New Ratio:

Determine the Share Acquired by Z from X and Y

Z’s share = \( \frac{1}{10} \).
Since this is acquired equally from X and Y:
- Share taken from X = \( \frac{1}{10} \div 2 = \frac{1}{20} \).
- Share taken from Y = \( \frac{1}{10} \div 2 = \frac{1}{20} \).

Adjust the Shares of X and Y

X’s new share = Old share – Share given to Z
= \( \frac{5}{8} – \frac{1}{20} \).
Convert to a common denominator:
\( \frac{5}{8} = \frac{50}{80}, \frac{1}{20} = \frac{4}{80} \).
\( X’s\ new\ share = \frac{50}{80} – \frac{4}{80} = \frac{46}{80} \).
Y’s new share = Old share – Share given to Z
= \( \frac{3}{8} – \frac{1}{20} \).
Convert to a common denominator:
\( \frac{3}{8} = \frac{30}{80}, \frac{1}{20} = \frac{4}{80} \).
\( Y’s\ new\ share = \frac{30}{80} – \frac{4}{80} = \frac{26}{80} \).

Z’s Share

Z’s new share = \( \frac{1}{10} = \frac{8}{80} \).

Combine the Shares

X : Y : Z = \( \frac{46}{80} : \frac{26}{80} : \frac{8}{80} \).

Simplify the Ratio

X : Y : Z = 46 : 26 : 8.
Simplified ratio = 23:13:4.

The new profit-sharing ratio is 23:13:4.

Question 4: A, B and C are partners sharing profits in 2:2:1 ratio admitted D for 1/8 share which he acquired entirely from A. Calculate new profit sharing ratio?

Answer 4: Calculation of New Profit-Sharing Ratio

Given:

A, B, and C share profits in the ratio of 2:2:1.
D is admitted with a \( \frac{1}{8} \) share in profits.
D’s share is acquired entirely from A.

Steps to Calculate the New Ratio:

Determine A’s Adjusted Share

A’s original share = \( \frac{2}{5} \) (since total ratio is 2+2+1 = 5).
D acquires \( \frac{1}{8} \) from A.
A’s new share = \( \frac{2}{5} – \frac{1}{8} \).
Convert to a common denominator:
\( \frac{2}{5} = \frac{16}{40}, \frac{1}{8} = \frac{5}{40} \).
A’s new share = \(\frac{16}{40} – \frac{5}{40} = \frac{11}{40} \).

B and C’s Shares Remain Unchanged

B’s share = \( \frac{2}{5} = \frac{16}{40} \).
C’s share = \( \frac{1}{5} = \frac{8}{40} \).

D’s Share

D’s share = \( \frac{1}{8} = \frac{5}{40} \).

Combine the Shares

A : B : C : D = \( \frac{11}{40} : \frac{16}{40} : \frac{8}{40} : \frac{5}{40} \).

Simplify the Ratio

A : B : C : D = 11 : 16 : 8 : 5.

The new profit-sharing ratio is 11:16:8:5.

Question 5: P and Q are partners sharing profits in 2:1 ratio. They admitted R into partnership giving him 1/5 share which he acquired from P and Q in 1:2 ratio. Calculate new profit sharing ratio?

Answer 5: Calculation of New Profit-Sharing Ratio

Given:

P and Q are partners sharing profits in the ratio of 2:1.
R is admitted with a \( \frac{1}{5} \) share in profits.
R acquires his \( \frac{1}{5} \) share from P and Q in a 1:2 ratio.

Steps to Calculate the New Ratio:

Determine the Share Acquired by R from P and Q

R’s total share = \( \frac{1}{5} \).
R acquires this share from P and Q in the ratio of 1:2.
R’s share from P = \( \frac{1}{5} \times \frac{1}{3} = \frac{1}{15} \).
R’s share from Q = \( \frac{1}{5} \times \frac{2}{3} = \frac{2}{15} \).

Adjust the Shares of P and Q

P’s original share = \( \frac{2}{3} \).
P’s new share = \( \frac{2}{3} – \frac{1}{15} = \frac{10}{15} – \)\(\frac{1}{15} = \frac{9}{15} = \frac{3}{5} \).
Q’s original share = \( \frac{1}{3} \).
Q’s new share = \( \frac{1}{3} – \frac{2}{15} = \frac{5}{15} – \)\(\frac{2}{15} = \frac{3}{15} = \frac{1}{5} \).

R’s Share

R’s share = \( \frac{1}{5} \) (as given).

Combine the Shares

P : Q : R = \( \frac{3}{5} : \frac{1}{5} : \frac{1}{5} \).

Convert to a Common Denominator

P : Q : R = \( \frac{3}{5} : \frac{1}{5} : \frac{1}{5} = 3 : 1 : 1 \).

The new profit-sharing ratio is 3:1:1.

Question 6: A, B and C are partners sharing profits in 3:2:2 ratio. They admitted D as a new partner for 1/5 share which he acquired from A, B and C in 2:2:1 ratio respectively. Calculate new profit sharing ratio?

Answer 6: Calculation of New Profit-Sharing Ratio

Given:

A, B, and C share profits in the ratio of 3:2:2.
D is admitted with a \( \frac{1}{5} \) share in profits.
D acquires his \( \frac{1}{5} \) share from A, B, and C in the ratio of 2:2:1.

Steps to Calculate the New Ratio:

Determine the Share Acquired by D from A, B, and C

D’s total share = \( \frac{1}{5} \).
D acquires this share from A, B, and C in the ratio of 2:2:1.
- D’s share from A = \( \frac{1}{5} \times \frac{2}{5} = \frac{2}{25} \).
- D’s share from B = \( \frac{1}{5} \times \frac{2}{5} = \frac{2}{25} \).
- D’s share from C = \( \frac{1}{5} \times \frac{1}{5} = \frac{1}{25} \).

Adjust the Shares of A, B, and C

A’s original share = \( \frac{3}{7} \).
A’s new share = \( \frac{3}{7} – \frac{2}{25} \).
Convert to a common denominator:
\( \frac{3}{7} = \frac{75}{175}, \frac{2}{25} = \frac{14}{175} \).
A’s new share = \(\frac{75}{175} – \frac{14}{175} = \frac{61}{175} \).
B’s original share = \( \frac{2}{7} \).
B’s new share = \( \frac{2}{7} – \frac{2}{25} \).
Convert to a common denominator:
\( \frac{2}{7} = \frac{50}{175}, \frac{2}{25} = \frac{14}{175} \).
B’s new share = \(\frac{50}{175} – \frac{14}{175} = \frac{36}{175} \).
C’s original share = \( \frac{2}{7} \).
C’s new share = \( \frac{2}{7} – \frac{1}{25} \).
Convert to a common denominator:
\( \frac{2}{7} = \frac{50}{175}, \frac{1}{25} = \frac{7}{175} \).
C’s new share = \(\frac{50}{175} – \frac{7}{175} = \frac{43}{175} \).

D’s Share

D’s share = \( \frac{1}{5} = \frac{35}{175} \).

Combine the Shares

A : B : C : D = \( \frac{61}{175} : \frac{36}{175} : \frac{43}{175} : \frac{35}{175} \).

Simplify the Ratio

A : B : C : D = 61 : 36 : 43 : 35.

The new profit-sharing ratio is 61:36:43:35.

Question 7: A and B were partners in a firm sharing profits in 3:2 ratio. They admitted C for 3/7 share which he took 2/7 from A and 1/7 from B. Calculate new profit sharing ratio?

Answer 7: Calculation of New Profit-Sharing Ratio

Given:

A and B share profits in the ratio 3:2.
C is admitted with a \( \frac{3}{7} \) share in profits.
C acquires \( \frac{3}{7} \) in the following manner:
\( \frac{2}{7} \) from A.
\( \frac{1}{7} \) from B.

Steps to Calculate the New Ratio:

Adjust the Shares of A and B

A’s original share = \( \frac{3}{5} \) (since 3+2 = 5 ).
A gives \( \frac{2}{7} \) to C.
A’s new share = \( \frac{3}{5} – \frac{2}{7} \). Convert to a common denominator:
\( \frac{3}{5} = \frac{21}{35}, \frac{2}{7} = \frac{10}{35} \).
A’s new share = \(\frac{21}{35} – \frac{10}{35} = \frac{11}{35} \).
B’s original share = \( \frac{2}{5} \).
B gives \( \frac{1}{7} \) to C.
B’s new share = \( \frac{2}{5} – \frac{1}{7} \). Convert to a common denominator:
\( \frac{2}{5} = \frac{14}{35}, \frac{1}{7} = \frac{5}{35} \).
B’s new share = \(\frac{14}{35} – \frac{5}{35} = \frac{9}{35} \).

C’s Share

C’s share = \( \frac{3}{7} = \frac{15}{35} \).

Combine the Shares

A : B : C = \( \frac{11}{35} : \frac{9}{35} : \frac{15}{35} \).

Simplify the Ratio

A : B : C = 11 : 9 : 15.

The new profit-sharing ratio is 11:9:15.

Question 8: A, B and C were partners in a firm sharing profits in 3:3:2 ratio. They admitted D as a new partner for 4/7 profit. D acquired his share 2/7 from A. 1/7 from B and 1/7 from C. Calculate new profit sharing ratio?

Answer 8: Calculation of New Profit-Sharing Ratio

Given:

A, B, and C share profits in the ratio 3:3:2.
D is admitted with a \( \frac{4}{7} \) share in profits.
D acquires \( \frac{4}{7} \) as follows:
\( \frac{2}{7} \) from A.
\( \frac{1}{7} \) from B.
\( \frac{1}{7} \) from C.

Steps to Calculate the New Ratio:

Calculate A, B, and C’s Adjusted Shares

Total of the original ratio = 3+3+2 = 8.
A’s original share = \( \frac{3}{8} \).
A gives \( \frac{2}{7} \) to D.
A’s new share = \( \frac{3}{8} – \frac{2}{7} \).
Convert to a common denominator:
\( \frac{3}{8} = \frac{21}{56}, \frac{2}{7} = \frac{16}{56} \).
A’s new share = \(\frac{21}{56} – \frac{16}{56} = \frac{5}{56} \).
B’s original share = \( \frac{3}{8} \).
B gives \( \frac{1}{7} \) to D.
B’s new share = \( \frac{3}{8} – \frac{1}{7} \).
Convert to a common denominator:
\( \frac{3}{8} = \frac{21}{56}, \frac{1}{7} = \frac{8}{56} \).
B’s new share = \(\frac{21}{56} – \frac{8}{56} = \frac{13}{56} \).
C’s original share = \( \frac{2}{8} = \frac{1}{4} \).
C gives \( \frac{1}{7} \) to D.
C’s new share = \( \frac{1}{4} – \frac{1}{7} \).
Convert to a common denominator:
\( \frac{1}{4} = \frac{14}{56}, \frac{1}{7} = \frac{8}{56} \).
C’s new share = \(\frac{14}{56} – \frac{8}{56} = \frac{6}{56} \).

D’s Share

D’s share = \( \frac{4}{7} = \frac{32}{56} \).

Combine the Shares

A : B : C : D = \( \frac{5}{56} : \frac{13}{56} : \frac{6}{56} : \frac{32}{56} \).

Simplify the Ratio

A : B : C : D = 5 : 13 : 6 : 32.

The new profit-sharing ratio is 5:13:6:32.

Question 9: Radha and Rukmani are partners in a firm sharing profits in 3:2 ratio. They admitted Gopi as a new partner. Radha surrendered 1/3 of her share in favour of Gopi and Rukmani surrendered 1/4 of her share in favour of Gopi. Calculate new profit sharing ratio?

Answer 9: Calculation of New Profit-Sharing Ratio

Given:

Radha and Rukmani share profits in the ratio 3:2.
Gopi is admitted as a new partner.
Radha surrenders \( \frac{1}{3} \) of her share to Gopi.
Rukmani surrenders \( \frac{1}{4} \) of her share to Gopi.

Steps to Calculate the New Ratio:

Calculate Radha’s Adjusted Share

Radha’s original share = \( \frac{3}{5} \) (since 3+2 = 5 ).
Radha surrenders \( \frac{1}{3} \) of her share to Gopi.
- Share surrendered = \( \frac{3}{5} \times \frac{1}{3} = \frac{1}{5} \).
Radha’s new share = \( \frac{3}{5} – \frac{1}{5} = \frac{2}{5} \).

Calculate Rukmani’s Adjusted Share

Rukmani’s original share = \( \frac{2}{5} \).
Rukmani surrenders \( \frac{1}{4} \) of her share to Gopi.
- Share surrendered = \( \frac{2}{5} \times \frac{1}{4} = \frac{1}{10} \).
Rukmani’s new share = \( \frac{2}{5} – \frac{1}{10} \).
Convert to a common denominator:
\( \frac{2}{5} = \frac{4}{10} \).
Rukmani’s new share = \(\frac{4}{10} – \frac{1}{10} = \frac{3}{10} \).

Gopi’s Share

Gopi’s share = \( \frac{1}{5} + \frac{1}{10} \).
Convert to a common denominator:
\( \frac{1}{5} = \frac{2}{10} \).
Gopi’s share = \(\frac{2}{10} + \frac{1}{10} = \frac{3}{10} \).

Combine the Shares

Radha : Rukmani : Gopi = \( \frac{2}{5} : \frac{3}{10} : \frac{3}{10} \).

Convert to a Common Denominator

Radha : Rukmani : Gopi = \( \frac{4}{10} : \frac{3}{10} : \frac{3}{10} \).
Simplified ratio = 4 : 3 : 3.

The new profit-sharing ratio is 4:3:3.

Question 10: . Singh, Gupta and Khan are partners in a firm sharing profits in 3:2:3 ratio. They admitted Jain as a new partner. Singh surrendered 1/3 of his share in favour of Jain: Gupta surrendered 1/4 of his share in favour of Jain and Khan surrendered 1/5 in favour of Jain. Calculate new profit sharing ratio?

Answer 10: Calculation of New Profit-Sharing Ratio

Given:

Singh, Gupta, and Khan share profits in the ratio 3:2:3.
Jain is admitted as a new partner.
Singh surrenders \( \frac{1}{3} \) of his share to Jain.
Gupta surrenders \( \frac{1}{4} \) of his share to Jain.
Khan surrenders \( \frac{1}{5} \) of his share to Jain.

Steps to Calculate the New Ratio:

Calculate Singh’s Adjusted Share

Singh’s original share = \( \frac{3}{8} \) (since 3+2+3 = 8 ).
Singh surrenders \( \frac{1}{3} \) of his share to Jain.
- Share surrendered = \( \frac{3}{8} \times \frac{1}{3} = \frac{1}{8} \).
Singh’s new share = \( \frac{3}{8} – \frac{1}{8} = \frac{2}{8} = \frac{1}{4} \).

Calculate Gupta’s Adjusted Share

Gupta’s original share = \( \frac{2}{8} \).
Gupta surrenders \( \frac{1}{4} \) of his share to Jain.
- Share surrendered = \( \frac{2}{8} \times \frac{1}{4} = \frac{1}{16} \).
Gupta’s new share = \( \frac{2}{8} – \frac{1}{16} \).
Convert to a common denominator:
\( \frac{2}{8} = \frac{4}{16} \).
\( Gupta’s\ new\ share = \frac{4}{16} – \frac{1}{16} = \frac{3}{16} \).

Calculate Khan’s Adjusted Share

Khan’s original share = \( \frac{3}{8} \).
Khan surrenders \( \frac{1}{5} \) of his share to Jain.
- Share surrendered = \( \frac{3}{8} \times \frac{1}{5} = \frac{3}{40} \).
Khan’s new share = \( \frac{3}{8} – \frac{3}{40} \).
Convert to a common denominator:
\( \frac{3}{8} = \frac{15}{40} \).
Khan’s new share = \(\frac{15}{40} – \frac{3}{40} = \frac{12}{40} = \frac{3}{10} \).

Calculate Jain’s Share

Jain’s share = \( \frac{1}{8} + \frac{1}{16} + \frac{3}{40} \).
Convert to a common denominator:
\( \frac{1}{8} = \frac{5}{40}, \frac{1}{16}\)
\( = \frac{2.5}{40}, \frac{3}{40} = \frac105/320\)

Let’s properly resolve this calculation step by step to ensure clarity.

Given:

Profit-sharing ratio: Singh : Gupta : Khan = ( 3:2:3 ).
Jain is admitted.
Singh surrenders \( \frac{1}{3} \), Gupta surrenders \( \frac{1}{4} \), and Khan surrenders \( \frac{1}{5} \) of their respective shares in favor of Jain.

Step 1: Find Each Partner’s Original Share
The total ratio is 3 + 2 + 3 = 8.

Singh’s original share = \( \frac{3}{8} \).
Gupta’s original share = \( \frac{2}{8} = \frac{1}{4} \).
Khan’s original share = \( \frac{3}{8} \).

Step 2: Determine Jain’s Share from Each Partner

From Singh:
\( \frac{1}{3} \) of Singh’s share = \( \frac{1}{3} \times \frac{3}{8} = \frac{1}{8} \).
From Gupta:
\( \frac{1}{4} \) of Gupta’s share = \( \frac{1}{4} \times \frac{2}{8} = \frac{1}{16} \).
From Khan:
\( \frac{1}{5} \) of Khan’s share = \( \frac{1}{5} \times \frac{3}{8} = \frac{3}{40} \).

Step 3: Adjust Each Partner’s Share

Singh’s new share:
\( \frac{3}{8} – \frac{1}{8} = \frac{2}{8} = \frac{1}{4} \).
Gupta’s new share:
\( \frac{2}{8} – \frac{1}{16} \).
Convert to a common denominator:
\( \frac{2}{8} = \frac{4}{16} \), so Gupta’s new share = \( \frac{4}{16} – \frac{1}{16} = \frac{3}{16} \).
Khan’s new share:
\( \frac{3}{8} – \frac{3}{40} \). Convert to a common denominator:
\( \frac{3}{8} = \frac{15}{40} \), so Khan’s new share = \( \frac{15}{40} – \frac{3}{40} = \frac{12}{40} = \frac{3}{10} \).
Jain’s total share:
\( \frac{1}{8} + \frac{1}{16} + \frac{3}{40} \). Convert to a common denominator:
\( \frac{1}{8} = \frac{5}{40}, \frac{1}{16} = \frac{2.5}{40}, \frac{3}{40} = \frac{3}{40} \).
Jain’s share = \( \frac{5}{40} + \frac{2.5}{40} + \frac{3}{40} = \frac{10.5}{40} = \frac{21}{80} \).

Step 4: Express the Shares in a Common Denominator

Singh = \( \frac{1}{4} = \frac{20}{80} \).
Gupta = \( \frac{3}{16} = \frac{15}{80} \).
Khan = \( \frac{3}{10} = \frac{24}{80} \).
Jain = \( \frac{21}{80} \).

Combine and Simplify:

Singh : Gupta : Khan : Jain = 20:15:24:21.

The new profit-sharing ratio is 20:15:24:21.

Question 11: Sandeep and Navdeep are partners in a firm sharing profits in 5:3 ratio. They admit C into the firm and the new profit sharing ratio was agreed at 4:2:1. Calculate the sacrificing ratio?

Answer 11: Calculation of Sacrificing Ratio

Given:

Old profit-sharing ratio (Sandeep:Navdeep) = ( 5:3 ).
New profit-sharing ratio (Sandeep:Navdeep:C) = ( 4:2:1 ).

Calculate Sacrifice for Each Partner

Sandeep’s Sacrifice = Old share – New share
\( \frac{5}{8} – \frac{4}{7} \).
Convert to a common denominator:
\( \frac{5}{8} = \frac{35}{56}, \frac{4}{7} = \frac{32}{56} \).
Sacrifice = \( \frac{35}{56} – \frac{32}{56} = \frac{3}{56} \).
Navdeep’s Sacrifice = Old share – New share
\( \frac{3}{8} – \frac{2}{7} \).
Convert to a common denominator:
\( \frac{3}{8} = \frac{21}{56}, \frac{2}{7} = \frac{16}{56} \).
Sacrifice = \( \frac{21}{56} – \frac{16}{56} = \frac{5}{56} \).

Sacrificing Ratio
Sandeep : Navdeep = 3:5.

Question 12: Rao and Swami are partners in a firm sharing profits and losses in 3:2 ratio. They admit Ravi as a new partner for 1/8 share in the profits. The new profit sharing ratio between Rao and Swami is 4:3. Calculate new profit sharing ratio and sacrificing ratio?

Answer 12: Given:

Rao and Swami share profits in the ratio 3:2.
Ravi is admitted for \( \frac{1}{8} \) share in profits.
Remaining share after Ravi = \( 1 – \frac{1}{8} = \frac{7}{8} \).
Rao and Swami agree to share the remaining \( \frac{7}{8} \) in a new ratio of 4:3.

Step 1: Calculate New Shares

Rao’s New Share:
\( \frac{4}{7} \times \frac{7}{8} = \frac{4}{8} = \frac{1}{2} \).
Swami’s New Share:
\( \frac{3}{7} \times \frac{7}{8} = \frac{3}{8} \).
Ravi’s Share:
\( \frac{1}{8} \) (as given).

New Profit-Sharing Ratio

Rao : Swami : Ravi = \( \frac{4}{8} : \frac{3}{8} : \frac{1}{8} = 4:3:1 \).

Step 2: Calculate Sacrificing Ratio

The sacrificing ratio is calculated as:
Sacrifice = Old Share – New Share

Rao’s Sacrifice:
Old share = \( \frac{3}{5} \), New share = \( \frac{4}{8} = \frac{1}{2} \).
\( \frac{3}{5} – \frac{4}{8} = \frac{24}{40} – \frac{20}{40} = \frac{4}{40} = \frac{1}{10} \).
Swami’s Sacrifice:
Old share = \( \frac{2}{5} \), New share = \( \frac{3}{8} \).
\( \frac{2}{5} – \frac{3}{8} = \frac{16}{40} – \frac{15}{40} = \frac{1}{40} \).

Sacrificing Ratio (Rao:Swami):
\( \frac{4}{40} : \frac{1}{40} = 4:1 \).

New Profit-Sharing Ratio: 4:3:1.
Sacrificing Ratio: 4:1.

Question 13: . Compute the value of goodwill on the basis of four years’ purchase of the average profits based on the last five years? The profits for the last five years were as follows:
Rs.
2015 = 40,000
2016 = 50,000
2017 = 60,000
2018 = 50,000
2019 = 60,000

Answer 13: Average Profit = \( \frac{Sum of given year’s Profit}{Number of given years}\)

Year	Profit
2013	40,000
2014	50,000
2015	60,000
2016	50,000
2017	60,000
Sum of 5 years profit	2,60,000

Average Profit = \(\frac{52,000}{5}\) = 52,000

Goodwill = Average Profit × Number of Year’s Purchases

= 52,000 × 4 = Rs 2,08,000

Question 14: Firm’s Capital in a business is Rs. 2,00,000. The normal rate of return on firm’s capital is 15%. During the year 2015 the firm earned a profit of Rs. 48,000. Calculate goodwill on the basis of 3 years purchase of super profit?

Answer 14: Given Data:

Firm’s Capital = ₹2,00,000
Normal Rate of Return = 15%
Actual Profit Earned = ₹48,000
Years of Purchase = 3

Step 1: Calculate Normal Profit

Normal Profit = Capital × Normal Rate of Return
= 2,00,000 × \(\frac{15}{100}\) = ₹30,000.

Step 2: Calculate Super Profit

Super Profit = Actual Profit – Normal Profit
= 48,000 – 30,000 = ₹18,000.

Step 3: Calculate Goodwill

Goodwill = Super Profit × Years of Purchase
= 18,000 × 3 = ₹54,000.

The goodwill of the firm is ₹54,000.

Question 15: The books of Ram and Bharat showed that the firm’s capital on 31.12.2016 was Rs. 5,00,000 and the profits for the last 5 years : 2015 Rs. 40,000; 2014 Rs. 50,000; 2013 Rs. 55,000; 2012 Rs. 70,000 and 2011 Rs. 85,000. Calculate the value of goodwill on the basis of 3 years purchase of the average super profits of the last 5 years assuming that the normal rate of return is 10%?

Answer 15: Given Data:

Firm’s Capital = ₹5,00,000
Profits for the last 5 years:
2015 = ₹40,000
2014 = ₹50,000
2013 = ₹55,000
2012 = ₹70,000
2011 = ₹85,000
Normal Rate of Return = 10%
Years of Purchase = 3

Step 1: Calculate Average Profit

Average Profit = \( \frac{\text{Sum of Profits for 5 years}}{5} \)
= 40,000 + 50,000 + 55,000 + 70,000 + 85,000 = 3,00,000

\(\frac{3,00,000}{5}\) = ₹60,000.

Step 2: Calculate Normal Profit

Normal Profit = Firm’s Capital × Normal Rate of Return
= 5,00,000 × \(\frac{10}{100}\) = ₹50,000.

Step 3: Calculate Super Profit

Super Profit = Average Profit – Normal Profit
= 60,000 – 50,000 = ₹10,000.

Step 4: Calculate Goodwill

Goodwill = Super Profit × Years of Purchase
= 10,000 × 3 = ₹30,000.

The goodwill of the firm is ₹30,000.

Question 16: Rajan and Rajani are partners in a firm. Their capitals were Rajan Rs. 3,00,000; Rajani Rs. 2,00,000. During the year 2015 the firm earned a profit of Rs. 1,50,000. Calculate the value of goodwill of the firm by capitalisation method assuming that the normal rate of return is 20%?

Answer 16: Given Data:

Rajan’s Capital = ₹3,00,000
Rajani’s Capital = ₹2,00,000
Total Capital = ₹3,00,000 + ₹2,00,000 = ₹5,00,000
Actual Profit = ₹1,50,000
Normal Rate of Return = 20%

Step 1: Calculate Normal Capital

Normal Capital = Actual Profit ÷ Normal Rate of Return
= 1,50,000 ÷ \(\frac{20}{100}\) = 1,50,000 ÷ 0.2 = ₹7,50,000.

Step 2: Calculate Goodwill

Goodwill = Normal Capital – Actual Capital
= ₹7,50,000 – ₹5,00,000 = ₹2,50,000.

The goodwill of the firm is ₹2,50,000.

Question 17: A business has earned average profits of Rs. 1,00,000 during the last few years. Find out the value of goodwill by capitalisation method, given that the assets of the business are Rs. 10,00,000 and its external liabilities are Rs. 1,80,000. The normal rate of return is 10%?

Answer 17: Given Data:

Average Profits = ₹1,00,000
Total Assets = ₹10,00,000
External Liabilities = ₹1,80,000
Normal Rate of Return = 10%

Step 1: Calculate Net Assets

Net Assets = Total Assets – External Liabilities
= 10,00,000 – 1,80,000 = ₹8,20,000.

Step 2: Calculate Normal Capital

Normal Capital = Average Profit ÷ Normal Rate of Return
= 1,00,000 ÷ \(\frac{10}{100}\) = 1,00,000 ÷ 0.1 = ₹10,00,000.

Step 3: Calculate Goodwill

Goodwill = Normal Capital – Net Assets
= 10,00,000 – 8,20,000 = ₹1,80,000.

The goodwill of the business is ₹1,80,000.

Question 18: Verma and Sharma are partners in a firm sharing profits and losses in the ratio of 5:3. They admitted Ghosh as a new partner for 1/5 share of profits. Ghosh is to bring in Rs. 20,000 as capital and Rs. 4,000 as his share of goodwill premium. Give the necessary journal entries:
a) When the amount of goodwill is retained in the business.
b) When the amount of goodwill is fully withdrawn.
c) When 50% of the amount of goodwill is withdrawn.
d) When goodwill is paid privately.

Answer 18:

Journal Entries
S.No.		Particulars			L.F.	Debit Amount ₹	Credit Amount ₹
Case (a)
	Cash A/c			Dr.		24,000
		To Ghosh’s Capital A/c					20,000
		To Premium for Goodwill A/c					4,000
	(Capital and Goodwill his share broughtby Ghosh)

	Premium for Godwill A/c			Dr.		4,000
		To Verma’s Capital A/c					2,500
		To Sharma’s Capital A/c					1,500
	(Goodwill brought by Ghosh credited to Old Partnersin Sacrificing ratio)

Case (b)	Cash A/c			Dr.		24,000
		To Ghosh Capital A/c					20,000
		To Premium for Goodwill A/c					4,000
	(Capital and Goodwill brought by Ghosh for (1/5)share of profit)

	Premium for Goodwill A/c			Dr.		4,000
		To Verma’s Capital A/c					2,500
		To Sharma’s Capital A/c					1,500
	(Goodwill brought by Ghosh creditedin Old Partner in Sacrificing Ratio)

	Verma’s Capital A/c		Dr.			2,500
	Sharma’s Capital A/c		Dr.			1,500
		To Cash A/c					4,000
	(Amount of Premium for Goodwill withdrawn byOld Partners)

Case (c)	Cash A/c			Dr.		24,000
		To Ghosh’s Capital A/c					20,000
		To Premium for Goodwill A/c					4,000
	(Capital and Goodwill brought by Ghosh for (1/5)share of profit)

	Premium for Goodwill A/c			Dr.		4,000
		To Verma’s Capital A/c					2,500
		To Sharma’s Capital A/c					1,500
	(Premium for Goodwill credited to Old Partner’sCaptial Account in sacrificing ratio)

	Verma’s Capital A/c			Dr.		1,250
	Sharma’s Capital A/c					750
		To Cash A/c					2,000
	(Half of the amount of premium for goodwill withdrawn by Old partners)

Case (d)	No entry: Goodwill was not brought into firm

Question 19: A and B are partners in a firm sharing profits and losses in the ratio of 3:2. They decide to admit C into partnership with 1/4 share in profits. C will bring in Rs. 30,000 for capital and the requisite amount of goodwill premium in cash. The goodwill of the firm is valued at Rs, 20,000. The new profit sharing ratio is 2:1:1. A and B withdraw their share of goodwill. Give necessary journal entries?

Answer 19:

Journal Entries
Date	Particulars		L.F.	Debit Amount ₹	Credit Amount ₹

	Cash A/c	Dr.		35,000
	To C’s Capital A/c				30,000
	To Premium for Goodwill A/c				5,000
	(Amount of Capital and Share of Goodwill brought by C)

	Premium for Goodwill A/c	Dr.		5,000
	To A’s Capital A/c				2,000
	To B’s Capital A/c				3,000
	(C’s Share of Goodwill credited to A and B in 2:3,Sacrificing Ratio)

	A’s Capital A/c	Dr.		2,000
	B’s Capital A/c	Dr.		3,000
	To Cash A/c				5,000
	(Share of Goodwill withdrawn by Old Partners)

Sacrificing Ratio = Old Ratio − New Ratio

A = \(\frac{3}{5}\) – \(\frac{2}{4}\)

= \(\frac{12 – 10}{20}\) = \(\frac{2}{20}\)

B = \(\frac{2}{5}\) – \(\frac{1}{4}\)

= \(\frac{8 – 5}{20}\) = \(\frac{3}{20}\)

Sacrificing Ratio = A : B

= \(\frac{2}{20}\) : \(\frac{3}{20}\)

= 2:3

Goodwill of the firm = Rs 20,000

C’s share of Goodwill = 20,000 x 1/4 = Rs. 5,000

A will receive = 5,000 x 2/5 = Rs. 2,000

Or 20,000 x 2/20 = 2,000

B will receive = 5,000 x 3/5 = 3,000

Or 20,000 x 3/20 = 3,000.

Question 20: Arti and Bharti are partners in a firm sharing profits in 3:2 ratio, They admitted Sarthi for 1/4 share in the profits of the firm. Sarthi brings Rs. 50,000 for his capital and Rs. 10,000 for his 1/4 share of goodwill. Goodwill already appears in the books of Arti and Bharti at Rs. 5,000. the new profit sharing ratio between Arti, Bharti and Sarthi will be 2:1:1. Record the necessary journal entries in the books of the new firm?

Answer 20:

Journal Entries
Date	Particulars		L.F.	Debit Amount ₹	Credit Amount ₹

	Arti’s Capital A/c	Dr.		3,000
	Bharti’s Capital A/c	Dr.		2,000
	To Goodwill A/c				5,000
	(Goodwill written off)

	Cash A/c	Dr.		60,000
	To Sarthi’s Capital A/c				50,000
	To Premium for Goodwill A/c				10,000
	(Amount of capital and share of goodwill brought by Sarthi)

	Premium for Goodwill A/c	Dr.		10,000
	To Arti’s Capital A/c				4,000
	To Bharti’s Capital A/c				6,000
	(Premium for Goodwill credited Arti’s Capital Account)

Old Ratio = Arti : Bharti
= 3 : 2
Sarthi admitted for \(\frac{1}{4}\) share in new firm.

New Ratio = Arti : Bharti : Sarthi
= 2 : 1 : 1
Sacrificing Ratio = Old Ratio − New Ratio

Arti = \(\frac{3}{5}\) – \(\frac{2}{4}\) = \(\frac{2}{20}\)

Bharti = \(\frac{2}{5}\) – \(\frac{1}{4}\) = \(\frac{3}{20}\)

Arti will receive = 10,000 x \(\frac{2}{5}\) = 4,000

Bharti will receive = 10,000 x \(\frac{3}{5}\) = 6,000.

Question 21: X and Y are partners in a firm sharing profits and losses in 4:3 ratio. They admitted Z for 1/8 share. Z brought Rs. 20,000 for his capital and Rs. 7,000 for his 1/8 share of goodwill. Goodwill already appears in the books at Rs. 40,000. Show necessary journal entries in the books of X, Y and Z?

Answer 21:

Journal Entries
Date	Particulars		L.F.	Debit Amount ₹	Credit Amount ₹

	Cash A/c	Dr.		27,000
	To Z’s Capital A/c				20,000
	To Premium for Goodwill A/c				7,000
	(Amount of Capital and his share of Goodwillbrought by Z)
	Premium for Goodwill A/c	Dr.		7,000
	To X’s Capital A/c				4,000
	To Y’s Capital A/c				3,000
	(Premium for Goodwill credit to Old Partners in Sacrificing Ratio)
	Goodwill ₹ 40,000 cannot be raised. According to AS-10 Goodwill,can be shown in the book if money and money value are paid for it.Here, no money or money value has been paid for Goodwill.

Question 22: Aditya and Balan are partners sharing profits and losses in 3:2 ratio. They admitted Christopher for 1/4 share in the profits. The new profit sharing ratio agreed was 2:1:1. Christopher brought Rs. 50,000 for his capital. His share of goodwill was agreed to at Rs. 15,000. Christopher could bring only Rs. 10,000 out of his share of goodwill. Record necessary journal entries in the books of the firm?

Answer 22:

Journal Entries
Date	Particulars		L.F.	Debit Amount ₹	Credit Amount ₹
	Cash A/c	Dr.		60,000
	To Christopher’s Capital A/c				50,000
	To Premium for Goodwill A/c				10,000
	(Amount of Capital and Premium for Goodwill brought byChristopher)
	Premium for Goodwill A/c	Dr.		10,000
	Christopher’s Capital A/c	Dr.		5,000
	To Adiya’s Capital A/c				6,000
	To Balam’s Capital A/c				9,000
	(Goodwill Christopher’s Share taken by Old Partner’s inSacrificing Ratio)

Sacrificing Ratio = Old Ratio − New Ratio

Aditya = \(\frac{3}{5}\) – \(\frac{2}{4}\) = \(\frac{12-10}{20}\) = \(\frac{2}{20}\)

Balam = \(\frac{2}{5}\) – \(\frac{1}{4}\) = \(\frac{8-5}{20}\) = \(\frac{3}{20}\)

Sacrificing Ratio = \(\frac{2}{20}\) : \(\frac{3}{20}\) = 2 : 3

Question 23: Amar and Samar were partners in a firm sharing profits and losses in 3:1 ratio. They admitted Kanwar for 1/4 share of profits. Kanwar could not bring his share of goodwill premium in cash. The Goodwill of the firm was valued at Rs. 80,000 on Kanwar’s admission. Record necessary journal entry for goodwill on Kanwar’s admission

Answer 23: Old Ratio = Amar : Samar
= 3 : 1
Kanwar admitted for 1/4 share of profit

Journal Entries
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Kanwar’s Capital A/c	Dr.		20,000
	To Amar’s Capital A/c				15,000
	To Samar’s Capital A/c				5,000
	(Kanwar’s share of goodwill charged from his capital account by Amar and Kanwar in sacrificing ratio)

New Firm’s Goodwill = Rs 80,000

Kanwar’s Share of Goodwill = 80,000 × (1/4) = 20,000

Kanwar’s Goodwill will be taken by Amar and Samar in their sacrificing ratio here. Sacrificing Ratio will be equal to old ratio because new and sacrificing ratio is not given, if sacrificing and new ratio is not given it is assumed that old partners sacrificed in their old ratio.

Question 24: Mohan Lal and Sohan Lal were partners in a firm sharing profits and losses in 3:2 ratio. They admitted Ram Lal for 1/4 share on 1.1.2013. It was agreed that goodwill of the firm will be valued at 3 years purchase of the average profits of last 4 years which were Rs. 50,000 for 2013, Rs. 60,000 for 2014, Rs. 90,000 for 2015 and Rs. 70,000 for 2016. Ram Lal did not bring his share of goodwill premium in cash. Record the necessary journal entries in the books of the firm on Ram Lal’s admission when:
a) Goodwill already appears in the books at Rs. 2,02,500.
b) Goodwill appears in the books at Rs. 2,500.
c) Goodwill appears in the books at Rs. 2,05,000.

Answer 24:

Year	Profit
2013	50,000
2014	60,000
2015	90,000
2016	70,000
Sum of 4 years profit	2,70,000

Average Profit = \(\frac{270000}{4}\) = Rs 67,500

Goodwill = Average Profit × No. of Years Purchases
= 67,500 × 3 = 2,02,500

Ram Lal entered into the firm for 1/4 share of Profit.
Ram Lal’s share of goodwill = 2,02, 500 × (1/4) = Rs 50,625

Here sacrificing ratio of Mohan Lal and Sohan Lal will be equal to old ratio because new and sacrificing ratio is not given.

Mohan Lal will get = Ram Lal’s Share of Goodwill × (3/5)
= 50,625 × (3/5) = 10,125 × 3 = Rs 30,375

Sohan Lal will = Ramlal Share of Goodwill × (1/5)= 50,625 × (1/5)= Rs 10,125 × 2 = Rs 20,250

Case (a)

Journal Entries
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
	Mohan Lal’s Capital A/c		Dr.		1,21,500
	Sohan Lal’s Capital A/c		Dr.		81,000
		To Goodwill A/c				2,02,500
	(Goodwill appeared in the old firm written off)

	Ramlal’s Capital A/c		Dr.		50,625
		To Mohan Lal’s Capital A/c				30,375
		To Sohan Lal’s Capital A/c				20,250
	(Ram Lal’s Shares of Goodwill charged from his accountand Distrbuted between in Mohan Lal and Sohan Lal inSacrificing Ratio)

Case (b)

Journal Entries
Date	Particulars			L.F.	Debit AmountRs	Credit Amount Rs
	Mohan Lal’s Capital A/c		Dr.		1,500
	Sohan Lal’s Capital A/c		Dr.		1,000
		To Goodwill A/c				2,500
	(Goodwill already appeared in the books of firmwritten off in old ratio)

	Ramlal’s Capital A/c		Dr.		50,625
	To Mohan Lal’s Capital A/c					30,375
	To Sohan Lal’s Capital A/c					20,250
	(Ram Lal’s Shares of Goodwill charged from hiscapital by Mohan Lal and Sohan Lal in sacrificing ratio)

Case (c)

Journal Entries
Date	Particulars		L.F.	Debit AmountRs	Credit Amount Rs
	Mohan Lal’s Capital A/c	Dr.		1,23,000
	Sohan Lal’s Capital A/c	Dr.		82,000
	To Ram Lal’s Capital A/c				2,05,000
	(Goodwill already appeared in the books of firm written off in Old Ratio)

	Ramlal’s Capital A/c	Dr.		50,625
	To Mohan Lal’s Capital A/c				30,375
	To Sohan Lal’s Capital A/c				20,250
	(Ram Lal’s Shares of Goodwill charged from his capitalby Mohan Lal and Sohan Lal in sacrificing ratio)

Question 25: Rajesh and Mukesh are equal partners in a firm. They admit Hari into partnership and the new profit sharing ratio between Rajesh, Mukesh and Hari is 4:3:2. On Hari’s admission goodwill of the firm is valued at Rs. 36,000. Hari is unable to bring his share of goodwill premium in cash. Rajesh, Mukesh and Hari decided not to show goodwill in their balance sheet. Record necessary journal entries for the treatment of goodwill on Hari’s admission.

Answer 25:

Books of Rajesh, Mukesh and HariJournal
Date	Particulars		L.F.	AmountRs	AmountRs
	Hari’s Capital A/c	Dr.		8,000
	To Rajesh’s Capital A/c				2,000
	To Mukesh’s Capital A/c				6,000
	(Adjustment of Hari’s share of goodwill)

Working Notes:
1) Goodwill of a firm = 36,000
Hari’s share in goodwill
= Goodwill of firm × admitting Partner Share
= 36,000 x \(\frac{2}{9}\) = 8,000
2) Sacrificing Ratio = Old Ratio − New Ratio

Rajesh’s = \(\frac{1}{2}\) – \(\frac{4}{9}\) = \(\frac{9-8}{18}\) = \(\frac{1}{8}\)

Mukes’s = \(\frac{1}{2}\) – \(\frac{3}{9}\) = \(\frac{9-6}{18}\) = \(\frac{3}{8}\)

Sacrificing Ratio between Rajesh and Mukesh 1:3.

Question 26: Amar and Akbar are equal partners in a firm. They admitted Anthony as a new partner and the new profit sharing ratio is 4:3:2. Anthony could not bring this share of goodwill Rs. 45,000 in cash. It is decided to do adjustment for goodwill without opening goodwill account. Pass the necessary journal entry for the treatment of goodwill?

Answer 26:

Books of Amar, Akbar and AnthonyJournal
Date	Particulars		L.F.	AmountRs	AmountRs
	Anthony’s Capital A/c	Dr.		45,000
	To Amar’s Capital A/c				11,250
	To Akbar’s Capital A/c				33,750
	(Adjustment of Anthony’s share of goodwill between Amar and Akbar in sacrificing ratio)

Working Notes:
1) Sacrificing Ratio = Old Ratio − New Ratio

Amar’s sacrificing Ratio = \(\frac{1}{2}\) – \(\frac{4}{9}\) = \(\frac{9-8}{18}\) = \(\frac{1}{8}\)

Akbar’s sacrificing Ratio = \(\frac{1}{2}\) – \(\frac{3}{9}\) = \(\frac{9-6}{18}\) = \(\frac{3}{8}\)

Sacrificing Ratio between Amar and Akbar = 1:3.

Question 27: Given below is the Balance Sheet of A and B, who are carrying on partnership business on 31.12.2016. A and B share profits and losses in the ratio of 2:1.

Balance Sheet of A and B as on December 31, 2016

Liabilites			Amount(Rs)	Assets	Amount(Rs)
Bills Payable			10,000	Cash in Hand	10,000
Creditors			58,000	Cash at Bank	40,000
Outstanding			2,000	Sundry Debtors	60,000
Expenses			–	Stock	40,000
Capitals:				Plant	1,00,000
	A	1,80,000		Buildings	1,50,000
	B	1,50,000	3,30,000
			4,00,000		4,00,000

C is admitted as a partner on the date of the balance sheet on the following terms:
(i) C will bring in Rs 1,00,000 as his capital and Rs 60,000 as his share of goodwill for 1/4 share in the profits.
(ii) Plant is to be appreciated to Rs 1,20,000 and the value of buildings is to be appreciated by 10%.
(iii) Stock is found over valued by Rs 4,000.
(iv) A provision for bad and doubtful debts is to be created at 5% of debtors.
(v) Creditors were unrecorded to the extent of Rs 1,000.
Pass the necessary journal entries, prepare the revaluation account and partners’ capital accounts, and show the Balance Sheet after the admission of C.

Answer 27:

Books of A, B and C Journal
Date	Particulars			L.F.	AmountRs	AmountRs
2016
Dec 31	Bank A/c		Dr.		1,60,000
		To C’s Capital A/c				1,00,000
		To Premium for Goodwill A/c				60,000
	(Capital and premium for goodwill brought by C for 1/4 th share)

	Premium for Goodwill A/c		Dr.		60,000
		To A’s Capital A/c				40,000
		To B’s Capital A/c				20,000
	(Premium for Goodwill brought by C transferred to old partners’ capital account in their sacrificing ratio, 3:1)

	Plant A/c		Dr.		20,000
	Building A/c		Dr.		15,000
		To Revaluation A/c				35,000
	(Value of assets increased)

	Revaluation A/c		Dr.		8,000
		To Stock				4,000
		To Provision for Doubtful Debts A/c				3,000
		To Creditors A/c (Unrecorded)				1,000
	(Assets and liabilities revalued)

	Revaluation A/c		Dr.		27,000
		To A’s Capital A/c				18,000
		To B’s Capital A/c				9,000
	(Profit on revaluation transferred to old partners capital account)

Revaluation Account
Dr.				Cr.
Particulars			AmountRs		Particulars	AmountRs
Stock			4,000		Plant	20,000
Provision for Doubtful Debts			3,000		Building	15,000
Creditors (Unrecorded)			1,000
Profit transferred to
	A’s Capital	18,000
	B’s Capital	9,000	27,000
			35,000			35,000

Partners’ Capital Account
Dr.					Cr.
Particulars	A	B	C	Particulars		A	B	C
Balance c/d	2,38,000	1,79,000	1,00,000	Balance b/d		1,80,000	1,50,000
				Bank				1,00,000
				Premium for Goodwill		40,000	20,000
				Revaluation		18,000	9,000
	2,38,000	1,79,000	1,00,000			2,38,000	1,79,000	1,00,000

Balance Sheet as on December 31, 2016
Liabilities			Amount(Rs)	Assets		Amount(Rs)
Bills Payable			10,000	Cash in Hand		10,000
Creditors			59,000	Cash at Bank		2,00,000
Outstanding Expenses			2,000	Sundry Debtors	60,000
Capital:				Less: Provision for Doubtful Debt	3,000	57,000
	A	2,38,000		Stock		36,000
	B	1,79,000		Plant		1,20,000
	C	1,00,000	5,17,000	Building		1,65,000
			5,88,000			5,88,000

Working Note:

1) Sacrificing ratio = Old Ratio − New Ratio

A’s Sacrificing ratio = \(\frac{2}{3}\) – \(\frac{2}{4}\) = \(\frac{8-6}{12}\) = \(\frac{2}{12}\)

B’s Sacrificing ratio = \(\frac{1}{3}\) – \(\frac{1}{4}\) = \(\frac{4-3}{12}\) = \(\frac{1}{12}\)

Sacrificing ratio between A and B = 2:1.

Question 28: Leela and Meeta were partners in a firm sharing profits and losses in the ratio of 5:3. In April 2017 they admitted Om as a new partner. On the date of Om’s admission the balance sheet of Leela and Meeta showed a balance of Rs. 16,000 in general reserve and Rs. 24,000 (Cr) in Profit and Loss Account. Record necessary journal entries for the treatment of these items on Om’s admission. The new profit sharing ratio between Leela, Meeta and Om was 5:3:2.

Answer 28:

Books of Leela, Meeta and OmJournal
Date	Particulars			L.F.	AmountRs	AmountRs
2017
Jan 1	General Reserve A/c		Dr.		16,000
	Profit and Loss A/c		Dr.		24,000
		To Leela’s Capital A/c				25,000
		To Meeta’s Capital A/c				15,000
	(General reserve and balance in Profit and Loss credited to old partners’ capital account in their old ratio, 5:3)

Question 29: Amit and Viney are partners in a firm sharing profits and losses in 3:1 ratio. On 1.1.2017 they admitted Ranjan as a partner. On Ranjan’s admission the profit and loss account of Amit and Viney showed a debit balance of Rs 40,000. Record necessary journal entry for the treatment of the same.

Answer 29:

Books of Amit, Viney and RanjanJournal
Date	Particulars			L.F.	AmountRs	AmountRs
2017
Jan 1	Amit’s Capital A/c		Dr.		30,000
	Viney’s Capital A/c		Dr.		10,000
		To Profit and Loss A/c				40,000
	(Debit Balance in Profit and Loss Account written off)

Question 30: A and B share profits in the proportions of 3/4 and 1/4. Their Balance Sheet on March 31, 2016 was as follows:

Balance Sheet of A and B as on March 31, 2016
Liabilites		Amount(Rs)	Assets	Amount(Rs)
Sundry creditors		41,500	Cash at Bank	26,500
Reserve fund		4,000	Bills Receivable	3,000
Capital Accounts			Debtors	16,000
	A	30,000	Stock	20,000
	B	16,000	Fixtures	1,000
			Land & Building	25,000
		91,500		91,500

On April 1,2017, C was admitted into partnership on the following terms:

That C pays Rs 10,000 as his capital.
That C pays Rs 5,000 for goodwill. Half of this sum is to be withdrawn by A and B.
That stock and fixtures be reduced by 10% and a 5%, provision for doubtful debts be created on Sundry Debtors and Bills Receivable.
That the value of land and buildings be appreciated by 20%.
There being a claim against the firm for damages, a liability to the extent of Rs 1,000 should be created.
An item of Rs 650 included in sundry creditors is not likely to be claimed and hence should be written back.

Record the above transactions (journal entries) in the books of the firm assuming that the profit sharing ratio between A and B has not changed. Prepare the new Balance Sheet on the admission of C.

Answer 30:

Books of A, B and C Journal
Date	Particulars				L.F.	AmountRs	AmountRs
2017
Apr. 01	Bank A/c		Dr.			15,000
		To C’s Capital A/c					10,000
		To Premium for Goodwill A/c					5,000
	(Capital and Premium for goodwill brought by C for 1/5 th share)

Apr. 01	Premium for Goodwill A/c					5,000
		To A’s Capital A/c					3,750
		To B’s Capital A/c					1,250
	(Amount of goodwill brought by C is transferred to old partners’ capital account in their sacrificing ratio, 3:1)

Apr. 01	A’s Capital A/c			Dr.		1,875
	B’s Capital A/c			Dr.		625
		To Bank A/c					2,500
	(Half of amount withdrawn by old partners)

Apr. 01	Revaluation A/c			Dr.		4,050
		To Stock A/c					2,000
		To Fixture A/c					100
		To Provision for doubtful Debts on Debtors A/c					800
		To provision for doubtful Debtson Bills Receivable A/c					150
		To Claim for Damages A/c					1,000
	(Assets and liabilities are revalued)

Apr. 01	Land and Building A/c			Dr.		5,000
	Sundry Creditors A/c					650
		To Revaluation A/c					5,650
	(Asset and liability are revalued)

Apr. 01	Revaluation A/c			Dr.		1,600
		To A’s Capital A/c					1,200
		To B’s Capital A/c					400
	(Profit on Revaluation transferred to old partners’ capital)

Apr. 01	Reserve Fund A/c			Dr.		4,000
		To A’s Capital A/c					3,000
		To B’s Capital A/c					1,000
	(Reserve Fund distributed among old partners)

Balance Sheet as on January 01, 2007
Liabilities			Amount(Rs)	Assets		Amount(Rs)
Sundry Creditors			40,850	Cash at Bank		39,000
Claim for Damages			1,000	Bills Receivable	3,000	2,850
	A	36,075	64,100	Less: Provision	150	2,850
	B	18,025		Debtors	16,000	15,200
	C	10,000		Less: Provision	800	15,200
				Stock		18,000
				Fixtures		900
				Land and Building		30,000
			1,05,950			1,05,950

Working Note: 1)

Partners’ Capital Account
Dr.					Cr.
Particulars	A	B	C	Particulars		A	B	C
Bank	1,875	625		Balance b/d		30,000	16,000
Balance c/d	36,075	18,025	10,000	Bank				10,000
				Premium for Goodwill		3,750	1,250
				Revaluation		1,200	400
				Reserve Fund		3,000	1,000
	37,950	18,650	10,000			37,950	18,650	10,000

Bank Account
Dr.		Cr.
Particulars	AmountRs	Particulars	AmountRs
Balance b/d	26,500	A’s Capital A/c	1,875
C’s Capital A/c	10,000	B’s Capital A/c	625
Premium for Goodwill	5,000	Balance c/d	39,000
	41,500		41,500

3) Sacrificing ratio = Old Ratio − New Ratio

A’s Sacrificing Share = \(\frac{3}{4}\) – \(\frac{3}{5}\) = \(\frac{12-9}{20}\) = \(\frac{3}{20}\)

B’ Sacrificing Share = \(\frac{1}{4}\) – \(\frac{1}{5}\) = \(\frac{5-4}{20}\) = \(\frac{1}{20}\)

Note: Assuming that ratio between A and B has not change hence sacrificing ratio should be same as old ratio.

Question 31: A and B are partners sharing profits and losses in the ratio of 3:1. On I^st Apr. 2017 they admitted C as a new partner for 1/4 share in the profits of the firm. C brings Rs 20,000 as for his 1/4 share in the profits of the firm. The capitals of A and B after all adjustments in respect of goodwill, revaluation of assets and liabilities, etc. has been worked out at Rs 50,000 for A and Rs 12,000 for B. It is agreed that partner’s capitals will be according to new profit sharing ratio. Calculate the new capitals of A and B and pass the necessary journal entries assuming that A and B brought in or withdrew the necessary cash as the case may be for making their capitals in proportion to their profit sharing ratio?

Answer 31:

Books of A, B and CJournal
Date	Particulars			L.F.	AmountRs	AmountRs
2017
Apr. 01	A’s Capital A/c		Dr.		5,000
		To Cash A/c				5,000
	(Excess capital withdrawn by A)

	Cash A/c		Dr.		3,000
		To B’s Capital A/c				3,000
	(Capital brought in by B to make in proportion to the profit sharing)

1) Calculation of New Profit sharing Ratio

C’s Share = \(\frac{1}{4}\)
Remaining share = 1 – \(\frac{1}{4}\) = \(\frac{3}{4}\)

A’s new share = \(\frac{3}{4}\) × \(\frac{3}{4}\) = \(\frac{9}{16}\)

B’s new share = \(\frac{1}{4}\) × \(\frac{3}{4}\) = \(\frac{3}{16}\)

\({C’s share = \frac{1}{4} × \frac{4}{4} = \frac{4}{16} }\)

New Profit sharing ratio of A, B and C will be 9:3:4

2) New Capital of A and B.

C bring Rs 20,000 for 1/4^th share of profit in the new firm.

Thus, total capital of firm on the basis of C’s share
= 20,000 x \(\frac{4}{1}\) = 80,000

A’s Capital = \(\frac{9}{16}\) x 80,000 = 45,000

Thus, A will withdraw = 50,000 – 45,000 = 5,000

B’s Capital = \(\frac{3}{16}\) x 80,000 = 15,000

Thus, B’s will bring 15,000 − 12,000 = 3,000

Question 32: Pinky, Qumar and Roopa partners in a firm sharing profits and losses in the ratio of 3:2:1. S is admitted as a new partner for 1/4 share in the profits of the firm, whichs he gets 1/8 from Pinky, and 1/16 each from Qmar and Roopa. The total capital of the new firm after Seema’s admission will be Rs 2,40,000. Seema is required to bring in cash equal to 1/4 of the total capital of the new firm. The capitals of the old partners also have to be adjusted in proportion of their profit sharing ratio. The capitals of Pinky, Qumar and Roopa after all adjustments in respect of goodwill and revaluation of assets and liabilities have been made are Pinky Rs 80,000, Qumar Rs 30,000 and Roopa Rs 20,000. Calculate the capitals of all the partners and record the necessary journal entries for doing adjustments in respect of capitals according to the agreement between the partners?

Answer 32: 1) Calculation of new profit sharing Ratio = Old Ratio − Sacrificing Ratio

Pinky = \(\frac{3}{6}\) – \(\frac{1}{8}\) = \(\frac{12-3}{24}\) = \(\frac{9}{24}\)
Qumar = \(\frac{2}{6}\) – \(\frac{1}{16}\) = \(\frac{16-3}{48}\) = \(\frac{13}{48}\)
Roopa = \(\frac{1}{6}\) – \(\frac{1}{16}\) = \(\frac{8-3}{48}\) = \(\frac{5}{48}\)

New profit sharing ratio between Pinky, Qumar, Roopa and Seema

\(\frac{9}{24}\) : \(\frac{13}{48}\) : \(\frac{5}{48}\) : \(\frac{1}{4}\) = \(\frac{18}{48}\) : \(\frac{13}{48}\) : \(\frac{5}{48}\) : \(\frac{12}{48}\)

= 18 : 13 : 5 : 12

2) Required capital of all partners in the new firm

Pinky’s Capital = 2,40,000 x \(\frac{18}{48}\) = 90,000

Qumar’s Capital = 2,40,000 x \(\frac{13}{48}\) = 65,000

Roopa’s Capital = 2,40,000 x \(\frac{5}{48}\) = 25,000

Seema’s Capital = 2,40,000 x \(\frac{12}{48}\) = 60,000

3) Amount to be brought by each partner

Pinky = 90,000 − 80,000 = 10,000

Qumar = 65,000 − 30,000 = 35,000

Roopa = 25,000 − 20,000 = 5,000

Seema = 2,40,000 x \(\frac{1}{4}\) =60,000

Books of Pinky, Qumar, Roopa and SeemaJournal
Date	Particularss			L.F.	AmountRs	AmountRs
	Bank A/c		Dr.		60,000
		To Seema Capital A/c				60,000
	(Seema bring her share of Capital for 1/4 th share of profit)

	Bank A/c		Dr.		50,000
		To Pinky’s Capital A/c				10,000
		To Qumar’s Capital A/c				35,000
		To Roopa’s Capital A/c				5,000
	(Amount brought by Pinky, Qumar and Roopa to make capitalequal to their proportion)

Question 33: The following was the Balance Sheet of Arun, Bablu and Chetan sharing profits and losses in the ratio of \(\frac{6}{14}\) : \(\frac{5}{14}\) : \(\frac{3}{14}\) respectively.

Liabilites			Amount(Rs)	Assets	Amount(Rs)
Creditors			9,000	Land and Buildings	24,000
Bills Payable			3,000	Furniture	3,500
Capital Accounts				Stock	14,000
	Arun	19,000		Debtors	12,600
	Bablu	16,000		Cash	900
	Chetan	8,000	43,000
			55,000		55,000

They agreed to take Deepak into partnership and give him a share of 1/8 on the following terms:
(a) that Deepak should bring in Rs 4,200 as goodwill and Rs 7,000 as his Capital;
(b) that furniture be depreciated by 12%;
(c) that stock be depreciated by 10% ;
(d) that a Reserve of 5% be created for doubtful debts;
(e) that the value of land and buildings having appreciated be brought upto Rs 31,000;
(f) that after making the adjustments the capital accounts of the old partners (who continue to share in the same proportion as before) be adjusted on the basis of the proportion of Deepak’s Capital to his share in the business, i.e., actual cash to be paid off to, or brought in by the old partners as the case may be.

Prepare Cash Account, Profit and Loss Adjustment Account (Revaluation Account) and the Opening Balance Sheet of the new firm.

Answer 33:

Books of Arun, Bablu, Chetan and DeepakProfit and Loss Adjustment Account(Revaluation Account)
Dr.				Cr.
Particulars			AmountRs		Particulars	AmountRs
Furniture			420		Land and Buildings	7,000
Stock			1,400
Reserve for Doubtful Debts			630
Profit on revaluation
Profit transferred to
	Arun’s Capital	1,950
	Bablu’s Capital	1,625
	Chetan’s Capital	975	4,550
			7,000			7,000

Cash Account
Dr.		Cr.
Particulars	AmountRs		Particulars	AmountRs
Balance b/d	900		Arun’s Capital	1,750
Chetan’s Capital	625		Bablu’s Capital	1,625
Deepak’s Capital	7,000		Balance c/d	9,350
Premium for Goodwill	4,200
	12,725			12,725

Balance Sheet
Liabilities			Amount(Rs)	Assets		Amount(Rs)
Creditors			9,000	Land and Buildings		31,000
Bills Payable			3,000	Furniture		3,080
Capital Account				Stock		12,600
	Arun	21,000		Debtor	12,600
	Bablu	17,500		Less: Reserve for Doubtful Debt	630	11,970
	Chetan	10,500		Cash		9,350
	Deepak	7,000	56,000
			68,000			68,000

Working Note: 1)

Partner’s Capital Account
Dr.					Cr.
Particulars	Arun	Bablu	Chetan	Deepak	Particulars	Arun	Bablu	Chetan	Deepak
Bank	1,750	1,625			Balance b/d	19,000	16,000	8,000
Balance c/d	21,000	17,500	10,500	7,000	Cash A/c				7,000
					Premium for goodwill	1,800	1,500	900
					Revaluation	1,950	1,625	975
					Bank			625
	22,750	19,125	10,500	7,000		22,750	19,125	10,500	7,000

2) Calculation of New Profit Sharing Ratio

Deepak’s Share = \(\frac{1}{8}\)

Remaining Share = 1 – \(\frac{1}{8}\) = \(\frac{7}{8}\)

Arun’s New Share = \(\frac{6}{14}\) × \(\frac{7}{8}\) = \(\frac{42}{112}\)

Bablu’s New Share = \(\frac{5}{14}\) × \(\frac{7}{8}\) = \(\frac{35}{112}\)

Chetan’s New Share = \(\frac{3}{14}\) × \(\frac{7}{8}\) = \(\frac{21}{112}\)

New Profit sharing ratio of Arun, Bablu, Chetan and Deepak

= \(\frac{42}{112}\) : \(\frac{35}{112}\) : \(\frac{21}{112}\) : or \(\frac{42}{112}\) : \(\frac{35}{112}\) : \(\frac{21}{112}\) : \(\frac{14}{112}\)

= 42 : 35 : 21 : 14 or 6 : 5 : 3 : 2

3) Calculation of capital of Arun, Bablu, and Chetan in the new firm
Deepak bring Rs 7,000 for \(\frac{1}{8}\) th share of profit.

Hence total capital of the new firm = 7,000 x \(\frac{8}{1}\) = 56,000

Arun’s Capital = 56,000 x \(\frac{6}{16}\) = 21,000

Bablu’s Capital = 56,000 x \(\frac{5}{16}\) = 17,500

Chetan’s Capital = 56,000 x \(\frac{3}{16}\) = 10,500

Question 34: Azad and Babli are partners in a firm sharing profits and losses in the ratio of 2:1. Chintan is admitted into the firm with 1/4 share in profits. Chintan will bring in Rs 30,000 as his capital and the capitals of Azad and Babli are to be adjusted in the profit sharing ratio. The Balance Sheet of Azad and Babli as on March 31, 2016 (before Chintan’s admission) was as follows:

Balance Sheet of A and B as on 31.03.2016
Liabilites			Amount(Rs)	Assets	Amount(Rs)
Creditors			8,000	Cash in hand	2,000
Bills payable			4,000	Cash at bank	10,000
General reserve			6,000	Sundry debtors	8,000
Capital accounts:				Stock	10,000
	Azad	50,000		Funiture	5,000
	Babli	32,000	82,000	Machinery	25,000
				Buildings	40,000
			1,00,000		1,00,000

It was agreed that
i) Chintan will bring in Rs 12,000 as his share of goodwill premium.
ii) Buildings were valued at Rs 45,000 and Machinery at Rs 23,000.
iii) A provision for doubtful debts is to be created @ 6% on debtors.
iv) The capital accounts of Azad and Babli are to be adjusted by opening current accounts.
Record necessary journal entries, show necessary ledger accounts and prepare the Balance Sheet after admission.

Answer 34:

Books of Azad, Babli and ChintanJournal
Date	Particulars			L.F.	AmountRs	AmountRs
2016
Mar. 31	Bank A/c		Dr.		42,000
		To Chintan’s Capital A/c				30,000
		To Premium for Goodwill A/c				12,000
	(Chintan brought Capital and Premium for Goodwill for 1/4share of profit)

	Premium for Goodwill A/c		Dr.		12,000
		To Azad’s Capital A/c				8,000
		To Babli’s Capital A/c				4,000
	(Goodwill brought by Chintan transferred to old partnerscapital account in their sacrificing ratio, 2:1)

	General Reserve A/c		Dr.		6,000
		To Azad’s Capital A/c				4,000
		To Babli’s Capital A/c				2,000
	(General reserve distributed between old partners)

	Building A/c		Dr.		5,000
		To Revaluation A/c				5,000
	(Increase in value of Building adjusted)

	Revaluation A/c		Dr.		2,480
		To Machinery A/c				2,000
		To Provision for Doubtful Debt				480
	(Decrease in value of machinery adjusted and Provision forDoubtful Debt created)

	Revaluation A/c		Dr.		2,520
		To Azad is Capital A/c				1,680
		To Babli’s Capital A/c				840
	(Profit on revaluation transferred to Azad and Babli’s CapitalAccount)

	Azad’s Capital A/c		Dr.		3,680
	To Azad’s Current A/c					3,680
	(Excess of Capital transferred to current account)

	Babli’s Capital A/c		Dr.		8,840
		To Babli’s Current A/c				8,840
	(Excess of Capital transferred to current account)

Revaluation Account
Dr.				Cr.
Particulars			AmountRs		Particulars	AmountRs
To Machinery			2,000		Building	5,000
To Provision for Doubtful Debt			480
To Profit transferred to
	Azad’s Capital	1,680
	Babli’s Capital	840	2,520
			5,000			5,000

Partner’s Capital Account
Dr.					Cr.
Particulars	Azad	Babli	Chintan	Particulars		Azad	Babli	Chintan
Current A/c	3,680	8,840		Balance b/d		50,000	32,000
Balance c/d	60,000	30,000	30,000	Bank				30,000
				Premium for Goodwill		8,000	4,000
				General Reserve		4,000	2,000
				Revaluation		1,680	840
	63680	38,840	30,000			63680	38,840	30,000

Balance Sheet as on December 31, 2006
Liabilities				Amount(Rs)	Assets		Amount(Rs)
Creditors				8,000	Cash in Hand		2,000
Bills Payable				4,000	Cash at Bank		52,000
Current Accounts:					Sundry Debtors	8,000
		Azad	3,680		Less: Provision for Doubtful debt	480	7,520
		Babli	8,840	12,520	Stock		10,000
Capital Accounts:					Furniture		5,000
	Azad		60,000		Machinery		23,000
	Babli		30,000		Building		45,000
	Chintan		30,000	1,20,000
				1,44,520			1,44,520

Working Note:
1) Calculation of New Profit Sharing Ratio

Chintan’s Share = 1/4

Remaining Share of firm = 1 – 1/4 = 3/4

Azad’s New Share = 2/3 × 3/4 = 6/12

Babli’s New Share = 1/3 × 3/4 = 3/12

New Profit sharing ratio of Azad, Babli and Chintan

= 6/12 : 3/12 : 1/4 or 6/12 : 3/12 : 3/12 or 6 : 3 : 3 or 2 : 1 : 1

2) New Capital of Azad, and Babli

Chintan bring Rs 30,000 for 1/4 share of profit. Hence total capital of a firm = 30,000 × 1/4 = 1,20,000

Azad’s Capital = 1,20,000 x 2/4 = 60,000

Babli’s Capital = 1,20,000 x 1/4 = 30,000

Question 35: Ashish and Dutta were partners in a firm sharing profits in 3:2 ratio. On Jan. 01, 2015 they admitted Vimal for 1/5 share in the profits. The Balance Sheet of Ashish and Dutta as on Jan. 01, 2016 was as follows

Balance Sheet of A and B as on 1.1.2016
Liabilites	AmountRs	Assets		AmountRs
Creditors	15,000	Land & Building		35,000
Bills Payable	10,000	Plant		45,000
Ashish Capital	80,000	Debtors	22,000
Dutta’s Capital	35,000	Less : Provision	2,000	20,000
		Stock		35,000
		Cash		5,000
	1,40,000			1,40,000

It was agreed that:
i) The value of Land and Buildingbeincreased by Rs 15,000.
ii) The value of plantbeincreased by 10,000.
iii) Goodwill of the firm be valued at Rs 20,000.
iv) Vimal to bring in capital to the extent of 1/5th of the total capital of the new firm.

Record the necessary journal entries and prepare the Balance Sheet of the firm after Vimal’s admission.

Answer 35:

Books of Ashish, Dutta and VimalJournal
Date	Particularss			L.F.	AmountRs	AmountRs
2016
Jan 1	Land and Building A/c		Dr.		15,000
	Plant A/c		Dr.		10,000
		To Revaluation A/c				25,000
	(Increased in the value of assets)

	Revaluation A/c		Dr.		25,000
		To Ashish’s Capital A/c				15,000
		To Dutta’s Capital A/c				10,000
	(Profit on revaluation transferred to partners capital account)

	Cash A/c		Dr.		36,000
		To Vimal Capital A/c				36,000
	(Capital brought by Vimal)

	Vimal’s Current A/c		Dr.		4,000
		To Ashish’s Capital A/c				2,400
		To Dutta’s Capital A/c				1,600
	(Vimal’s share goodwill adjusted through his current account)

Balance Sheet as on January 01, 2016
Liabilities	AmountRs	Assets		AmountRs
Creditors	15,000	Land and Building		50,000
Bills Payable	10,000	Plant		55,000
		Debtors	22,000
Ashish’s Capital Account	97,400	Less: Provision	2,000	20,000
Dutta’s Capital Account	46,600	Stock		35,000
Vimal’s Capital Account	36,000	Cash		41,000
		Vimal’s Current Account		4,000
	2,05,000			2,05,000

Working Note: 1)

Partners’ Capital Account
Dr.					Cr.
Particulars	Ashish	Dutta	Vimal	Particulars		Ashish	Dutta	Vimal
				Balance b/d		80,000	35,000
				Revaluation		15,000	10,000
Balance c/d	97,400	46,600	36,000	Cash				36,000
				Vimal Current		2,400	1,600
	97,400	46,600	36,000			97,400	46,600	36,000

Vimal Current Account
Dr.		Cr.
Particulars	AmountRs	Particulars	AmountRs
Ashish’s Capital A/c	2,400
Dutta’s Capital A/c	1,600	Balance c/d	4,000
	4,000		4,000

3) Calculation of New Profit Sharing Ratio
Vimal’s Share = 1/5

Remaining Share of Firm = 1 – 1/5 = 4/5

Ashish’s share in the new firm = 3/5 × 4/5 = 12/25

Dutta’s share in the new firm = 2/5 × 4/5 = 8/25

New Profit sharing ratio of Ashish, Dutta and Vimal

= 12/25 : 8/25 : 1/5 or 12/25 : 8/25 : 5/25 or 12 : 8 : 5

4) Sacrificing Ratio = Old Ratio – New Ratio

Ashish’s Sacrificing Share = 3/5- 12/25 = 15-12/25 = 3/25

Dutta’s Sacrificing Share = 2/5 – 8/25 = 10-8/25 = 2/25

Sacrificing Ratio between Ashish and Dutta is 3:2

Note: Here, Goodwill has been adjusted through current account because Vimal has not brought his share of goodwill and he is to bring capital in proportion to total capital of the new firm after adjustment.

5) Capital of new firm on the basis of old partners adjusted capital:
Total adjusted capital of old partners

Ashish’s Capital	=	97,400
Dutta’s Capital	=	46,600
		1,44,000

Remaining Share of Ashish and Dutta (old partners) in the new firm = 4/5

Capital of the new firm = 1,44,000 × 5/4 = 1,80,000

Vimal’s share in the capital of the new firm = 1,80,000 x 1/5 = 36,000.

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Ncert Solutions for Class 12 Accountancy Chapter 2 Reconstitution of a Partnership Firm Admission of a Partner

Class 12 accountancy chapter 2 exercise solutions: Accountancy Class 12 Chapter 2 questions and answers

Question 1: Identify various matters that need adjustments at the time of admission of a new partner.

Question 2: Why it is necessary to ascertain new profit sharing ratio even for old partners when a new partner is admitted?

Question 3: What is sacrificing ratio? Why is it calculated?

Question 4: On what occasions sacrificing ratio is used?

Question 5: If some goodwill already exists in the books and the new partner brings in his share of goodwill in cash, how will you deal with existing amount of goodwill?

Question 6: Why there is need for the revaluation of assets and liabilities on the admission of a partner?

Question 1: Do you advise that assets and liabilities must be revalued at the time of admission of a partner? If so, why? Also describe how is this treated in the book of account?

Question 2: What is goodwill? What factors affect goodwill?

Question 3: Explain various methods of valuation of goodwill.

Question 4: If it is agreed that the capital of all the partners should be proportionate to the new profit sharing ratio, how will you work out the new capital of each partner? Give examples and state how necessary adjustments will be made.

Question 5: Explain how will you deal with goodwill when new partner is not in a position to bring his share of goodwill in cash.

Question 6: Explain various methods for the treatment of goodwill on the admission of a new partner?

Question 7: How will you deal with the accumulated profits and losses and reserves on the admission of a new partner?

Question 8: At what figures the value of assets and liabilities appear in the books of the firm after revaluation has been due. Show with the help of an imaginary balance sheet.

Question 1: A and B were partners in a firm sharing profits and losses in the ratio of 3:2. They admit C into the partnership with 1/6 share in the profits. Calculate the new profit sharing ratio?

Question 2: A,B,C were partners in a firm sharing profits in 3:2:1 ratio. They admitted D for 10% profits. Calculate the new profit sharing ratio?

Question 3: X and Y are partners sharing profits in 5:3 ratio admitted Z for 1/10 share which he acquired equally for X and Y. Calculate new profit sharing ratio?

Question 4: A, B and C are partners sharing profits in 2:2:1 ratio admitted D for 1/8 share which he acquired entirely from A. Calculate new profit sharing ratio?

Question 5: P and Q are partners sharing profits in 2:1 ratio. They admitted R into partnership giving him 1/5 share which he acquired from P and Q in 1:2 ratio. Calculate new profit sharing ratio?

Question 6: A, B and C are partners sharing profits in 3:2:2 ratio. They admitted D as a new partner for 1/5 share which he acquired from A, B and C in 2:2:1 ratio respectively. Calculate new profit sharing ratio?

Question 7: A and B were partners in a firm sharing profits in 3:2 ratio. They admitted C for 3/7 share which he took 2/7 from A and 1/7 from B. Calculate new profit sharing ratio?

Question 8: A, B and C were partners in a firm sharing profits in 3:3:2 ratio. They admitted D as a new partner for 4/7 profit. D acquired his share 2/7 from A. 1/7 from B and 1/7 from C. Calculate new profit sharing ratio?

Question 9: Radha and Rukmani are partners in a firm sharing profits in 3:2 ratio. They admitted Gopi as a new partner. Radha surrendered 1/3 of her share in favour of Gopi and Rukmani surrendered 1/4 of her share in favour of Gopi. Calculate new profit sharing ratio?

Question 11: Sandeep and Navdeep are partners in a firm sharing profits in 5:3 ratio. They admit C into the firm and the new profit sharing ratio was agreed at 4:2:1. Calculate the sacrificing ratio?

Question 12: Rao and Swami are partners in a firm sharing profits and losses in 3:2 ratio. They admit Ravi as a new partner for 1/8 share in the profits. The new profit sharing ratio between Rao and Swami is 4:3. Calculate new profit sharing ratio and sacrificing ratio?

Question 13: . Compute the value of goodwill on the basis of four years’ purchase of the average profits based on the last five years? The profits for the last five years were as follows: Rs.2015 = 40,0002016 = 50,0002017 = 60,0002018 = 50,0002019 = 60,000

Question 14: Firm’s Capital in a business is Rs. 2,00,000. The normal rate of return on firm’s capital is 15%. During the year 2015 the firm earned a profit of Rs. 48,000. Calculate goodwill on the basis of 3 years purchase of super profit?

Question 16: Rajan and Rajani are partners in a firm. Their capitals were Rajan Rs. 3,00,000; Rajani Rs. 2,00,000. During the year 2015 the firm earned a profit of Rs. 1,50,000. Calculate the value of goodwill of the firm by capitalisation method assuming that the normal rate of return is 20%?

Question 17: A business has earned average profits of Rs. 1,00,000 during the last few years. Find out the value of goodwill by capitalisation method, given that the assets of the business are Rs. 10,00,000 and its external liabilities are Rs. 1,80,000. The normal rate of return is 10%?

Question 27: Given below is the Balance Sheet of A and B, who are carrying on partnership business on 31.12.2016. A and B share profits and losses in the ratio of 2:1.

Question 30: A and B share profits in the proportions of 3/4 and 1/4. Their Balance Sheet on March 31, 2016 was as follows:

Question 33: The following was the Balance Sheet of Arun, Bablu and Chetan sharing profits and losses in the ratio of \(\frac{6}{14}\) : \(\frac{5}{14}\) : \(\frac{3}{14}\) respectively.

Question 35: Ashish and Dutta were partners in a firm sharing profits in 3:2 ratio. On Jan. 01, 2015 they admitted Vimal for 1/5 share in the profits. The Balance Sheet of Ashish and Dutta as on Jan. 01, 2016 was as follows

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Question 13: . Compute the value of goodwill on the basis of four years’ purchase of the average profits based on the last five years? The profits for the last five years were as follows:
Rs.
2015 = 40,000
2016 = 50,000
2017 = 60,000
2018 = 50,000
2019 = 60,000