12th Standard Accountancy English Medium - Admission of a Partner 3 Mark Book Back Question Paper and Answer Key 2022 - 2023 | QB365

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12th Standard Accountancy English Medium - Admission of a Partner 3 Mark Book Back Question Paper and Answer Key 2022 - 2023

Published on: 01/09/2022

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Questions:

Generic 3

10 x 3 = 30

Sam and Jose are partners in a firm sharing profits and losses in the ratio of 3:2. On 1st April 2018, they admitted Joel as a partner. On the date of Joel’s admission, goodwill appeared in the books of the firm at Rs. 30,000. By assuming fluctuating capital method, pass the necessary journal entry if the partners decide to
(a) write off the entire amount of existing goodwill
(b) write off Rs. 20,000 of the existing goodwill.

Varun and Barath are partners sharing profits and losses 5:4. They admit Dhamu into partnership. The new profit sharing ratio is agreed at 1:1:1. Dhamu’s share of goodwill is valued at Rs. 15,000 of which he pays Rs .10,000 in cash. Pass necessary journal entries for adjustment of goodwill on the assumption that the fluctuating capital method is followed.

Anu and Arul were partners in a firm sharing profits and losses in the ratio of 4:1. They have decided to admit Mano into the firm for 2/5 share of profits. The goodwill of the firm on the date of admission was valued at Rs.25,000. Mano is not able to bring in cash for his share of goodwill. Pass necessary journal entry for goodwill on the assumption that the fluctuating capital method is followed.

Malathi and Shobana are partners sharing profits and losses in the ratio of 5:4. They admit Jayasri into partnership for 1/3 share of profit. Jayasri pays cash Rs. 6,000 towards her share of goodwill. The new ratio is 3:2:1. Pass necessary journal entry for adjusting goodwill on the assumption that the fixed capital method is followed.

Deepak, Senthil and Santhosh are partners sharing profits and losses equally. They admit Jerald into partnership for 1/3 share in future profits. The goodwill of the firm is valued at Rs.45,000 and Jerald brought cash for his share of goodwill. The existing partners withdraw half of the amount of their share of goodwill. Pass necessary journal entries for adjusting goodwill on the assumption that the fluctuating capital method is followed.

Write a short note on accounting treatment of goodwill.

What are the journal entries to be passed on revaluation of assets and liabilities?

What are the adjustments required at the time of admission of a partner?

Sathish and Sudhan are partners in a firm sharing profits and losses in the ratio of 4:3. On 1st April 2018, they admitted Sasi as a partner. On the date of Sasi’s admission, goodwill appeared in the books of the firm at Rs. 35,000. By assuming fluctuating capital account, pass the necessary journal entry if the partners decide to
(i) write off the entire amount of existing goodwill
(ii) write off Rs.21,000 of the existing goodwill

10.

Rajesh and Ramesh are partners sharing profits in the ratio 3:2. Raman is admitted as a new partner and the new profit sharing ratio is decided as 5:3:2. The following revaluations are made. Pass journal entries and prepare revaluation account.
(a) The value of building is increased by Rs. 15,000.
(b) The value of the machinery is decreased by Rs. 4,000.
(c) Provision for doubtful debt is made for Rs. 1,000.

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Answers Key:

Generic 3

10 x 3 = 30

(a) write off the entire amount of existing goodwill

Journal entry
Date	Particulars	Debit Rs.	Credit Rs.
2018 April 1	Sam's Capital (3/5) Dr	18,000
	Jose's capital (2/5) Dr	12,000
	To Goodwill A/c		30,000
	(Existing goodwill written off)

(b) write off Rs. 20,000 of the existing goodwill.

Journal Entry
Date	Particulars	Debit Rs.	Credit Rs.
2018 April 1	Sam's Capital A/c (3/5) Dr	12,000
	Joe's Capital A/c(2/5) Dr	8,000
	To Goodwill A/c		20,000
	(Existing goodwill written off to the extent of Rs. 20,000)

Calculation of sacrificing ratio
Sacrificing ratio = Old share - New share
Varun \(=\frac { 5 }{ 9 } =\frac { 1 }{ 3 } =\frac { 5-3 }{ 9 } =\frac { 2 }{ 9 } \)
Bharath \(=\frac { 4 }{ 9 } =\frac { 1 }{ 3 } =\frac { 4-3 }{ 9 } =\frac { 1 }{ 9 } \)
Therefore, sacrificing ratio is 2 : 1

Journal Entry
Particulars	Debit Rs.	Credit Rs.
Cash A/c Dr	10,000
Damn's capital A/c Dr	5,000
To Varun's capital A/c (2/3)		10,000
To Bharath's Capital A/c (1/3)		5,000
(Share of goodwill of Damu credited to old partner's capital account)

As the sacrifice made by the existing partners is not mentioned, it is assumed that they sacrifice in their old profit sharing ratio of 4 : 1. Therefore sacrificing ratio is 4 : 1
Manos share of goodwill = 25,000 x \(\frac{2}{5}\)
= Rs. 10,000

Journal Entry
Particulars	Debit Rs.	Credit Rs.
Manos capital A/c Dr	10,000
To Anu's capital A/c \((\frac{4}{5})\)		8,000
To Arul's capital A/c \((\frac{1}{5})\)		2,000
(Mano's share of goodwill created to the old partner's capital account in the sacrificing ratio)

Calculation of sacrificing ratio
Sacrificing ratio = Old share - New share
Malathi \(=\frac { 5 }{ 9 } -\frac { 3 }{ 6 } =\frac { 30-27 }{ 54 } \)
\(=\frac { 3 }{ 54 } =\frac { 1 }{ 18 } \)
Shobana \(=\frac { 4 }{ 9 } -\frac { 2 }{ 6 } =\frac { 24-18 }{ 54 } =\frac { 6 }{ 54 } =\frac { 2 }{ 18 } \)
Therefore sacrificing ratio is \(\frac { 1 }{ 18 } :\frac { 2 }{ 18 } \) (or) 1:2

Journal Entry
Particulars	Debit Rs.	Credit Rs.
Bank A/c Dr	6,000
To Malathi's current A/c (1/3)		2,000
To Shoban's current A/c (2/3)		4,000
(Cash brought for goodwill credited to old partners capital account in sacrificing ratio)

Ierald's share of goodwill = 45,000\(\times \frac{1}{3}\)
Rs. 15,000
As the sacrifice made by the existing partners is not mentioned, it is assumed that they sacrifice in their old profit sharing ratio is 1 : 1 : 1

Journal Entries
Particulars	Debit Rs.	Credit Rs.
Bank A/c Dr	15,000
To Deepaks capital A/c		5,000
To Senthil's Capital A/c		5,000
To Santhosh's capital A/c		5,000
(Cash brought for goodwill credited to Old partner's capital account in sacrificing ratio)
Deepak's capital A/c Dr	2,500
Senthil's Capital A/c Dr	2,500
Santhosh's Capital A/c Dr	2,500
To Bank A/c		7,500
(Cash withdrawn by the partners)

According treatment for goodwill on admission of a partner is discussed below:
i) When new partner brings cash onwards goodwill
When the new partner brings cash towards goodwill in addition to the amount of capital it is distributed to the existing partners in the sacrificing ratio.
(ii) When the new partner does not bring goodwill in cash or in kind
If the new partner does not bring goodwill in cash or in kind, his share of goodwill must be adjusted through the capital accounts of the partners.
(iii) When the new partner brings only a part of the goodwill in cash or in kind
Sometimes the new partner may bring only a part of the goodwill in cash or assets. In such a case, for the cash or the assets brought the respective account is debited and for the amount not brought in cash or kind, the new partner's capital account is debited
(iv) Existing goodwill
If goodwill already appears in the books of accounts at the time of admission if the partners decide, it can be written off by transferring it to the existing partner's capital account/current account in the old profit sharing ratio.

Following are the journal entries to be passed to record the revaluation of assets and liabilities
Particulars		Debit Rs.	Credit Rs.
1. For increase in the value of asset
Concerned asset A/c	Dr	XXX
To Revaluation A/c			XXX
2. For decrease in the value of asset
Revaluation A/c	Dr	XXX
To Concerned asset A/c			XXX
3. For increase in the amount of liabilities
Revaluation A/c	Dr	XXX
To Concerned liabilities A/c			XXX
4. For decrease in the amount of liability
Concerned liability A/c	Dr	XXX
To Revaluation A/c			XXX
5. For recording an unrecorded asset
Concerned asset A/c	Dr	XXX
To Revaluation A/c			XXX
6. For recording an unrecorded liability
Revaluation A/c	Dr	XXX
To Concerned liability A/c			XXX
7. For transferring the balance in revaluation Alc
(a) If there is profit on revaluation
Revaluation A/c	Dr	XXX
To Old partner's capital A/c (individually in old ratio)			XXX
(b) If there is loss on revaluation
Old partner's capital Alc (individually in old ratio)		XXX
To Revaluation Ale			XXX

The following adjustment are necessary at the time of admission of a partner
(i) Distribution of accumulated profits, reserves and losses.
(ii) Revaluation of assets and liabilities
(iii) Determination of new profit sharing ratio and sacrificing ratio
(iv) Adjustment for goodwill
(v) Adjustment of capital on the basis of new profit sharing ratio (if so agreed).

i) To write off the entire amount of existing goodwill

**Journal entry**
Date	Particulars		Debit Rs.	Credit Rs.
2018	Sathish’s capital A/c (4/7)	Dr..	20,000
Apri 1	Sudhan’s capital A/c (3/7)	Dr.	15,000
	To Goodwill A/c (Existing goodwill written off)			35,000

(ii) To write off Rs. 21,000 of the existing goodwill

**Journal entry**
Date	Particulars		Debit Rs.	Credit Rs.
2018	Sathish’s capital A/c (21,000 \(\times\) 4/7)	Dr.	12,000
Apri 1	Sudhan’s capital A/c (21,000 \(\times\) 3/7)	Dr.	9,000
	To Goodwill A/c (Existing goodwill written off to the extent of Rs. 21,000)			21,000

10.

**Journal entries**
Particulars		Debit Rs.	Credit Rs.
Buildings A/c	Dr.	15,000
To Revaluation A/c (Appreciation in value of buildings recorded)			15,000
Revaluation A/c	Dr.	5,000
To Machinery A/c			4,000
To Provision for doubtful debts A/c (Decrease in assets recorded and provision made)			1,000
Revaluation A/c	Dr.	10,000
To Rajesh’s capital A/c			6,000
To Ramesh’s capital A/c (Profit on revaluation transferred)			4,000

**Dr. Revaluation Account Cr.**
Particulars	Rs.	Rs.	Particulars	Rs.
To Machinery A/c		4,000	By Buildings A/c	15,000
To Provision for doubtful debts A/c		1,000
To Profit on revaluation transferred to
Rajesh’s capital A/c (3/5)	6,000
Ramesh’s capital A/c (2/5)	4,000	10,000
		15,000		15,000