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Page 1 ACCOUNTANCY – XII TREATMENT OF GOODWILL CASE1: When new partner bring his share of goodwill (premium method) Step 1: find N.R. Step 2: find S.R. (S.R.= O.R-N.R) Step 3: find new partners share in the firms goodwill(firms goodwill X news partners share) *if new partners share of goodwill is given than no need of step 3 * if firms goodwill is not given than find the firms goodwill Step 4: pass journal entries Compulsory Journal entries Particulars L.f. Amt DR. Amt. Cr. For capital Bank A/c Dr. To New partners capital A/c(C’s Capital A/c) For premium for goodwill Bank A/c Dr. To premium for goodwill A/c For distribution of goodwill(goodwill is retained in the business) In S.R Premium for goodwill A/c Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c) Optional entries Particulars L.f. Amt DR. Amt. Cr. When goodwill is retained in the firm In S.R Premium for goodwill A/c Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c) When goodwill is withdrawn by partners In S.R Old Partners capital A/c(A’s Capital A/c) Dr. Old Partners capital A/c(B’s Capital A/c) Dr. To bank A/c Old goodwill appears in the balance sheet/Old goodwill is to be written off In O.R Old Partners capital A/c(A’s Capital A/c) Dr. Old Partners capital A/c(B’s Capital A/c) Dr. To Goodwill A/c Profits of the new firm is given it will distributed In new ratio(after the admission of new partner) In N.R P & L Appropriation A/c Dr. To New Partners capital A/c(A’s Capital A/c) To New Partners capital A/c(B’s Capital A/c) To New Partners capital A/c(C’s Capital A/c) When goodwill is bought in kind(other than cash) Assets A/c Dr. To Premium for goodwill When capital is bought In kind(other than cash) Assets A/c Dr. To New partners capital A/c Page 2 ACCOUNTANCY – XII TREATMENT OF GOODWILL CASE1: When new partner bring his share of goodwill (premium method) Step 1: find N.R. Step 2: find S.R. (S.R.= O.R-N.R) Step 3: find new partners share in the firms goodwill(firms goodwill X news partners share) *if new partners share of goodwill is given than no need of step 3 * if firms goodwill is not given than find the firms goodwill Step 4: pass journal entries Compulsory Journal entries Particulars L.f. Amt DR. Amt. Cr. For capital Bank A/c Dr. To New partners capital A/c(C’s Capital A/c) For premium for goodwill Bank A/c Dr. To premium for goodwill A/c For distribution of goodwill(goodwill is retained in the business) In S.R Premium for goodwill A/c Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c) Optional entries Particulars L.f. Amt DR. Amt. Cr. When goodwill is retained in the firm In S.R Premium for goodwill A/c Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c) When goodwill is withdrawn by partners In S.R Old Partners capital A/c(A’s Capital A/c) Dr. Old Partners capital A/c(B’s Capital A/c) Dr. To bank A/c Old goodwill appears in the balance sheet/Old goodwill is to be written off In O.R Old Partners capital A/c(A’s Capital A/c) Dr. Old Partners capital A/c(B’s Capital A/c) Dr. To Goodwill A/c Profits of the new firm is given it will distributed In new ratio(after the admission of new partner) In N.R P & L Appropriation A/c Dr. To New Partners capital A/c(A’s Capital A/c) To New Partners capital A/c(B’s Capital A/c) To New Partners capital A/c(C’s Capital A/c) When goodwill is bought in kind(other than cash) Assets A/c Dr. To Premium for goodwill When capital is bought In kind(other than cash) Assets A/c Dr. To New partners capital A/c ACCOUNTANCY – XII CASE2: When new partner does not bring his share of goodwill (memorandum method) Step 1: find N.R. Step 2: find S.R. (S.R.= O.R-N.R) Step 3: find new partners share in the firms goodwill(firms goodwill X news partners share) *if new partners share of goodwill is given than no need of step 3 * if firms goodwill is not given than find the firms goodwill Step 4: pass journal entries Compulsory Journal entries Particulars L.f. Amt DR. Amt. Cr. For capital Bank A/c Dr. To New partners capital A/c(C’s Capital A/c) For distribution of goodwill In S.R New partners current A/c(C’s Current A/c) Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c) Page 3 ACCOUNTANCY – XII TREATMENT OF GOODWILL CASE1: When new partner bring his share of goodwill (premium method) Step 1: find N.R. Step 2: find S.R. (S.R.= O.R-N.R) Step 3: find new partners share in the firms goodwill(firms goodwill X news partners share) *if new partners share of goodwill is given than no need of step 3 * if firms goodwill is not given than find the firms goodwill Step 4: pass journal entries Compulsory Journal entries Particulars L.f. Amt DR. Amt. Cr. For capital Bank A/c Dr. To New partners capital A/c(C’s Capital A/c) For premium for goodwill Bank A/c Dr. To premium for goodwill A/c For distribution of goodwill(goodwill is retained in the business) In S.R Premium for goodwill A/c Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c) Optional entries Particulars L.f. Amt DR. Amt. Cr. When goodwill is retained in the firm In S.R Premium for goodwill A/c Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c) When goodwill is withdrawn by partners In S.R Old Partners capital A/c(A’s Capital A/c) Dr. Old Partners capital A/c(B’s Capital A/c) Dr. To bank A/c Old goodwill appears in the balance sheet/Old goodwill is to be written off In O.R Old Partners capital A/c(A’s Capital A/c) Dr. Old Partners capital A/c(B’s Capital A/c) Dr. To Goodwill A/c Profits of the new firm is given it will distributed In new ratio(after the admission of new partner) In N.R P & L Appropriation A/c Dr. To New Partners capital A/c(A’s Capital A/c) To New Partners capital A/c(B’s Capital A/c) To New Partners capital A/c(C’s Capital A/c) When goodwill is bought in kind(other than cash) Assets A/c Dr. To Premium for goodwill When capital is bought In kind(other than cash) Assets A/c Dr. To New partners capital A/c ACCOUNTANCY – XII CASE2: When new partner does not bring his share of goodwill (memorandum method) Step 1: find N.R. Step 2: find S.R. (S.R.= O.R-N.R) Step 3: find new partners share in the firms goodwill(firms goodwill X news partners share) *if new partners share of goodwill is given than no need of step 3 * if firms goodwill is not given than find the firms goodwill Step 4: pass journal entries Compulsory Journal entries Particulars L.f. Amt DR. Amt. Cr. For capital Bank A/c Dr. To New partners capital A/c(C’s Capital A/c) For distribution of goodwill In S.R New partners current A/c(C’s Current A/c) Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c) ACCOUNTANCY – XII CASE3: When new partner brings a part of his share of goodwill (premium +memorandum method) Step 1: find N.R. Step 2: find S.R. (S.R.= O.R-N.R) Step 3: find new partners share in the firms goodwill(firms goodwill X news partners share) *if new partners share of goodwill is given than no need of step 3 * if firms goodwill is not given than find the firms goodwill Step 4: pass journal entries Compulsory Journal entries Particulars L.f. Amt DR. Amt. Cr. For capital Bank A/c Dr. To New partners capital A/c(C’s Capital A/c) 40000 40000 For premium for goodwill (premium bought by the partner ) Bank A/c Dr. To premium for goodwill A/c 5000 5000 For distribution of goodwill (premium bought by the partner and not bought by the partner ) S.R Premium for goodwill A/c Dr. New partners capital A/c(C’s Current A/c) Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c) 5000 10000 9000 6000 Page 4 ACCOUNTANCY – XII TREATMENT OF GOODWILL CASE1: When new partner bring his share of goodwill (premium method) Step 1: find N.R. Step 2: find S.R. (S.R.= O.R-N.R) Step 3: find new partners share in the firms goodwill(firms goodwill X news partners share) *if new partners share of goodwill is given than no need of step 3 * if firms goodwill is not given than find the firms goodwill Step 4: pass journal entries Compulsory Journal entries Particulars L.f. Amt DR. Amt. Cr. For capital Bank A/c Dr. To New partners capital A/c(C’s Capital A/c) For premium for goodwill Bank A/c Dr. To premium for goodwill A/c For distribution of goodwill(goodwill is retained in the business) In S.R Premium for goodwill A/c Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c) Optional entries Particulars L.f. Amt DR. Amt. Cr. When goodwill is retained in the firm In S.R Premium for goodwill A/c Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c) When goodwill is withdrawn by partners In S.R Old Partners capital A/c(A’s Capital A/c) Dr. Old Partners capital A/c(B’s Capital A/c) Dr. To bank A/c Old goodwill appears in the balance sheet/Old goodwill is to be written off In O.R Old Partners capital A/c(A’s Capital A/c) Dr. Old Partners capital A/c(B’s Capital A/c) Dr. To Goodwill A/c Profits of the new firm is given it will distributed In new ratio(after the admission of new partner) In N.R P & L Appropriation A/c Dr. To New Partners capital A/c(A’s Capital A/c) To New Partners capital A/c(B’s Capital A/c) To New Partners capital A/c(C’s Capital A/c) When goodwill is bought in kind(other than cash) Assets A/c Dr. To Premium for goodwill When capital is bought In kind(other than cash) Assets A/c Dr. To New partners capital A/c ACCOUNTANCY – XII CASE2: When new partner does not bring his share of goodwill (memorandum method) Step 1: find N.R. Step 2: find S.R. (S.R.= O.R-N.R) Step 3: find new partners share in the firms goodwill(firms goodwill X news partners share) *if new partners share of goodwill is given than no need of step 3 * if firms goodwill is not given than find the firms goodwill Step 4: pass journal entries Compulsory Journal entries Particulars L.f. Amt DR. Amt. Cr. For capital Bank A/c Dr. To New partners capital A/c(C’s Capital A/c) For distribution of goodwill In S.R New partners current A/c(C’s Current A/c) Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c) ACCOUNTANCY – XII CASE3: When new partner brings a part of his share of goodwill (premium +memorandum method) Step 1: find N.R. Step 2: find S.R. (S.R.= O.R-N.R) Step 3: find new partners share in the firms goodwill(firms goodwill X news partners share) *if new partners share of goodwill is given than no need of step 3 * if firms goodwill is not given than find the firms goodwill Step 4: pass journal entries Compulsory Journal entries Particulars L.f. Amt DR. Amt. Cr. For capital Bank A/c Dr. To New partners capital A/c(C’s Capital A/c) 40000 40000 For premium for goodwill (premium bought by the partner ) Bank A/c Dr. To premium for goodwill A/c 5000 5000 For distribution of goodwill (premium bought by the partner and not bought by the partner ) S.R Premium for goodwill A/c Dr. New partners capital A/c(C’s Current A/c) Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c) 5000 10000 9000 6000 ACCOUNTANCY – XII Case 4: When S.R. comes in to negative (old partners starts gaining) at the time of admission of the partner. Step 1: find N.R. Step 2: find S.R. (S.R.= O.R-N.R) * this comes into negative for a old partner Step 3: find firms goodwill by the new partners share (firm goodwill = reciprocal of new partner profit share X new Partner’s goodwill ) Step 4: multiply the firms goodwill with gainers partner share Step 5: pass journal entries Compulsory Journal entries Particulars L.f. Amt DR. Amt. Cr. For capital Bank A/c Dr. To New partners capital A/c(C’s Capital A/c) For premium for goodwill (premium bought by the partner ) Bank A/c Dr. To premium for goodwill A/c For distribution of goodwill (premium bought by the partner) S.R Premium for goodwill A/c Dr. Gainers A/c Dr. To Partners capital A/c(only sacrificing partner) To Sacrificer A/c Page 5 ACCOUNTANCY – XII TREATMENT OF GOODWILL CASE1: When new partner bring his share of goodwill (premium method) Step 1: find N.R. Step 2: find S.R. (S.R.= O.R-N.R) Step 3: find new partners share in the firms goodwill(firms goodwill X news partners share) *if new partners share of goodwill is given than no need of step 3 * if firms goodwill is not given than find the firms goodwill Step 4: pass journal entries Compulsory Journal entries Particulars L.f. Amt DR. Amt. Cr. For capital Bank A/c Dr. To New partners capital A/c(C’s Capital A/c) For premium for goodwill Bank A/c Dr. To premium for goodwill A/c For distribution of goodwill(goodwill is retained in the business) In S.R Premium for goodwill A/c Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c) Optional entries Particulars L.f. Amt DR. Amt. Cr. When goodwill is retained in the firm In S.R Premium for goodwill A/c Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c) When goodwill is withdrawn by partners In S.R Old Partners capital A/c(A’s Capital A/c) Dr. Old Partners capital A/c(B’s Capital A/c) Dr. To bank A/c Old goodwill appears in the balance sheet/Old goodwill is to be written off In O.R Old Partners capital A/c(A’s Capital A/c) Dr. Old Partners capital A/c(B’s Capital A/c) Dr. To Goodwill A/c Profits of the new firm is given it will distributed In new ratio(after the admission of new partner) In N.R P & L Appropriation A/c Dr. To New Partners capital A/c(A’s Capital A/c) To New Partners capital A/c(B’s Capital A/c) To New Partners capital A/c(C’s Capital A/c) When goodwill is bought in kind(other than cash) Assets A/c Dr. To Premium for goodwill When capital is bought In kind(other than cash) Assets A/c Dr. To New partners capital A/c ACCOUNTANCY – XII CASE2: When new partner does not bring his share of goodwill (memorandum method) Step 1: find N.R. Step 2: find S.R. (S.R.= O.R-N.R) Step 3: find new partners share in the firms goodwill(firms goodwill X news partners share) *if new partners share of goodwill is given than no need of step 3 * if firms goodwill is not given than find the firms goodwill Step 4: pass journal entries Compulsory Journal entries Particulars L.f. Amt DR. Amt. Cr. For capital Bank A/c Dr. To New partners capital A/c(C’s Capital A/c) For distribution of goodwill In S.R New partners current A/c(C’s Current A/c) Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c) ACCOUNTANCY – XII CASE3: When new partner brings a part of his share of goodwill (premium +memorandum method) Step 1: find N.R. Step 2: find S.R. (S.R.= O.R-N.R) Step 3: find new partners share in the firms goodwill(firms goodwill X news partners share) *if new partners share of goodwill is given than no need of step 3 * if firms goodwill is not given than find the firms goodwill Step 4: pass journal entries Compulsory Journal entries Particulars L.f. Amt DR. Amt. Cr. For capital Bank A/c Dr. To New partners capital A/c(C’s Capital A/c) 40000 40000 For premium for goodwill (premium bought by the partner ) Bank A/c Dr. To premium for goodwill A/c 5000 5000 For distribution of goodwill (premium bought by the partner and not bought by the partner ) S.R Premium for goodwill A/c Dr. New partners capital A/c(C’s Current A/c) Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c) 5000 10000 9000 6000 ACCOUNTANCY – XII Case 4: When S.R. comes in to negative (old partners starts gaining) at the time of admission of the partner. Step 1: find N.R. Step 2: find S.R. (S.R.= O.R-N.R) * this comes into negative for a old partner Step 3: find firms goodwill by the new partners share (firm goodwill = reciprocal of new partner profit share X new Partner’s goodwill ) Step 4: multiply the firms goodwill with gainers partner share Step 5: pass journal entries Compulsory Journal entries Particulars L.f. Amt DR. Amt. Cr. For capital Bank A/c Dr. To New partners capital A/c(C’s Capital A/c) For premium for goodwill (premium bought by the partner ) Bank A/c Dr. To premium for goodwill A/c For distribution of goodwill (premium bought by the partner) S.R Premium for goodwill A/c Dr. Gainers A/c Dr. To Partners capital A/c(only sacrificing partner) To Sacrificer A/c ACCOUNTANCY – XII Case 5: Hidden goodwill / inferred goodwill Step 1: find N.R. Step 2: find S.R. (S.R.= O.R-N.R) Step 3: find firms capital by the new partners share (firm capital = reciprocal of new partner profit share X new Partner’s capital) Step 4: find hidden goodwill (firms capital as per the new partner share – firms existing capital {A+B+C} ) Step 5: find new partners share in the firm’s hidden goodwill (firm’s goodwill X news partners share) Step 6: pass journal entries Compulsory Journal entries Particulars L.f. Amt DR. Amt. Cr. For capital Bank A/c Dr. To New partners capital A/c(C’s Capital A/c) For distribution of goodwill In S.R New partners capital A/c(C’s Current A/c) Dr. To old Partners capital A/c(A’s Capital A/c) To old Partners capital A/c(B’s Capital A/c)Read More
79 docs|41 tests
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1. What is goodwill in commerce? |
2. How is goodwill treated in accounting? |
3. What are the methods used to determine the value of goodwill? |
4. Can goodwill be sold or transferred separately from the business? |
5. How does the treatment of goodwill differ under different accounting standards? |
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