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M and J are partners in a firm sharing profits in the ratio 3:2 . They admit R as a new partner . The new profit sharing ratio between M , J and R will be 5:3:2 . R brought in ₹ 25,000 for his share of premium for goodwill . Pass necessary journal entries for the treatment of goodwill .?
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M and J are partners in a firm sharing profits in the ratio 3:2 . They...
Journal Entries for Treatment of Goodwill
Introduction:
When a new partner is admitted to a partnership firm, the value of goodwill needs to be calculated and adjusted accordingly. Goodwill refers to the value of the reputation and customer base of the firm.
Calculation of Goodwill:
The value of goodwill can be calculated as follows:
Goodwill = (New profit sharing ratio of the old partners - Old profit sharing ratio of the old partners) * Total value of the firm
In this case, the old profit sharing ratio of M and J was 3:2 and the new profit sharing ratio of M, J, and R is 5:3:2. Therefore, the value of goodwill can be calculated as follows:
Goodwill = (5/10 - 3/5) * Total value of the firm
Goodwill = 1/10 * Total value of the firm
Journal Entries:
The journal entries for the treatment of goodwill are as follows:
1. To record the admission of R as a new partner:
Cash/Bank Account Dr.
R's Capital Account Dr. (for the amount of capital brought in by R)
To M's Capital Account
To J's Capital Account
2. To record the adjustment for goodwill:
Goodwill Account Dr. (for the calculated value of goodwill)
To M's Capital Account (3/5 of the goodwill value)
To J's Capital Account (2/5 of the goodwill value)
3. To record the payment of premium for goodwill by R:
Goodwill Account Dr. (for the premium paid by R)
To R's Capital Account
Conclusion:
The treatment of goodwill is important in a partnership firm as it ensures that the value of the firm is adjusted fairly when a new partner is admitted. The above journal entries need to be recorded to ensure that the accounts are updated correctly.
Introduction:
When a new partner is admitted to a partnership firm, the value of goodwill needs to be calculated and adjusted accordingly. Goodwill refers to the value of the reputation and customer base of the firm.
Calculation of Goodwill:
The value of goodwill can be calculated as follows:
Goodwill = (New profit sharing ratio of the old partners - Old profit sharing ratio of the old partners) * Total value of the firm
In this case, the old profit sharing ratio of M and J was 3:2 and the new profit sharing ratio of M, J, and R is 5:3:2. Therefore, the value of goodwill can be calculated as follows:
Goodwill = (5/10 - 3/5) * Total value of the firm
Goodwill = 1/10 * Total value of the firm
Journal Entries:
The journal entries for the treatment of goodwill are as follows:
1. To record the admission of R as a new partner:
Cash/Bank Account Dr.
R's Capital Account Dr. (for the amount of capital brought in by R)
To M's Capital Account
To J's Capital Account
2. To record the adjustment for goodwill:
Goodwill Account Dr. (for the calculated value of goodwill)
To M's Capital Account (3/5 of the goodwill value)
To J's Capital Account (2/5 of the goodwill value)
3. To record the payment of premium for goodwill by R:
Goodwill Account Dr. (for the premium paid by R)
To R's Capital Account
Conclusion:
The treatment of goodwill is important in a partnership firm as it ensures that the value of the firm is adjusted fairly when a new partner is admitted. The above journal entries need to be recorded to ensure that the accounts are updated correctly.
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M and J are partners in a firm sharing profits in the ratio 3:2 . They...
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M and J are partners in a firm sharing profits in the ratio 3:2 . They admit R as a new partner . The new profit sharing ratio between M , J and R will be 5:3:2 . R brought in ₹ 25,000 for his share of premium for goodwill . Pass necessary journal entries for the treatment of goodwill .?
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M and J are partners in a firm sharing profits in the ratio 3:2 . They admit R as a new partner . The new profit sharing ratio between M , J and R will be 5:3:2 . R brought in ₹ 25,000 for his share of premium for goodwill . Pass necessary journal entries for the treatment of goodwill .? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about M and J are partners in a firm sharing profits in the ratio 3:2 . They admit R as a new partner . The new profit sharing ratio between M , J and R will be 5:3:2 . R brought in ₹ 25,000 for his share of premium for goodwill . Pass necessary journal entries for the treatment of goodwill .? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for M and J are partners in a firm sharing profits in the ratio 3:2 . They admit R as a new partner . The new profit sharing ratio between M , J and R will be 5:3:2 . R brought in ₹ 25,000 for his share of premium for goodwill . Pass necessary journal entries for the treatment of goodwill .?.
M and J are partners in a firm sharing profits in the ratio 3:2 . They admit R as a new partner . The new profit sharing ratio between M , J and R will be 5:3:2 . R brought in ₹ 25,000 for his share of premium for goodwill . Pass necessary journal entries for the treatment of goodwill .? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about M and J are partners in a firm sharing profits in the ratio 3:2 . They admit R as a new partner . The new profit sharing ratio between M , J and R will be 5:3:2 . R brought in ₹ 25,000 for his share of premium for goodwill . Pass necessary journal entries for the treatment of goodwill .? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for M and J are partners in a firm sharing profits in the ratio 3:2 . They admit R as a new partner . The new profit sharing ratio between M , J and R will be 5:3:2 . R brought in ₹ 25,000 for his share of premium for goodwill . Pass necessary journal entries for the treatment of goodwill .?.
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M and J are partners in a firm sharing profits in the ratio 3:2 . They admit R as a new partner . The new profit sharing ratio between M , J and R will be 5:3:2 . R brought in ₹ 25,000 for his share of premium for goodwill . Pass necessary journal entries for the treatment of goodwill .?, a detailed solution for M and J are partners in a firm sharing profits in the ratio 3:2 . They admit R as a new partner . The new profit sharing ratio between M , J and R will be 5:3:2 . R brought in ₹ 25,000 for his share of premium for goodwill . Pass necessary journal entries for the treatment of goodwill .? has been provided alongside types of M and J are partners in a firm sharing profits in the ratio 3:2 . They admit R as a new partner . The new profit sharing ratio between M , J and R will be 5:3:2 . R brought in ₹ 25,000 for his share of premium for goodwill . Pass necessary journal entries for the treatment of goodwill .? theory, EduRev gives you an
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