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A B and C are partners sharing profit and losses in the ratio of 5 ratio 4 ratio 1 it was decided that with the effect of structural 2016 the profit sharing ratio will be 9 Reshu 6 ratio 5 Goodwill is to be valued at 2 years of purchase of average of three years of profit the profit for 2013-14 and 2014-15 and 2016 of 15 48042 and 60000 respectively pass the necessary general entry for the treatment of goodwill?
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A B and C are partners sharing profit and losses in the ratio of 5 rat...
General Entry for Treatment of Goodwill


Valuation of Goodwill


  • Goodwill is valued at 2 years of purchase of average of three years of profit

  • Therefore, average profit = (Rs. 15,48,042 + Rs. 60,000 + Rs. X) / 3

  • Where X is the profit for the year 2015-16

  • 9:6:5 is the new profit sharing ratio after the admission of the new partner

  • Therefore, the new share of Reshu = 9 / 20, and the new share of A and C = 11 / 20

  • The new share of A and C will be divided in their old ratio of 5:1

  • Therefore, the new share of A = 11 / 20 x 5 / 6 = 0.4583

  • The new share of C = 11 / 20 x 1 / 6 = 0.0917

  • The total new share of A, C, and Reshu = 0.4583 + 0.0917 + 0.45 = 1

  • The new share of Reshu is 0.45



General Entry

The following general entry will be passed for the treatment of goodwill:


  • Profit and Loss Adjustment Account Dr. To A's Capital Account To C's Capital Account To Reshu's Capital Account

  • Here, the Profit and Loss Adjustment Account will be debited with the amount of goodwill

  • A's Capital Account, C's Capital Account, and Reshu's Capital Account will be credited in their respective new profit sharing ratio

  • The amount of goodwill will be calculated as follows:

  • Goodwill = Average Profit x Number of Years' Purchase - Capitalized Value of Net Assets

  • Capitalized Value of Net Assets = Total Assets - Total Liabilities - Value of Reserves and Surplus

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A B and C are partners sharing profit and losses in the ratio of 5 ratio 4 ratio 1 it was decided that with the effect of structural 2016 the profit sharing ratio will be 9 Reshu 6 ratio 5 Goodwill is to be valued at 2 years of purchase of average of three years of profit the profit for 2013-14 and 2014-15 and 2016 of 15 48042 and 60000 respectively pass the necessary general entry for the treatment of goodwill?
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A B and C are partners sharing profit and losses in the ratio of 5 ratio 4 ratio 1 it was decided that with the effect of structural 2016 the profit sharing ratio will be 9 Reshu 6 ratio 5 Goodwill is to be valued at 2 years of purchase of average of three years of profit the profit for 2013-14 and 2014-15 and 2016 of 15 48042 and 60000 respectively pass the necessary general entry for the treatment of goodwill? for Class 12 2024 is part of Class 12 preparation. The Question and answers have been prepared according to the Class 12 exam syllabus. Information about A B and C are partners sharing profit and losses in the ratio of 5 ratio 4 ratio 1 it was decided that with the effect of structural 2016 the profit sharing ratio will be 9 Reshu 6 ratio 5 Goodwill is to be valued at 2 years of purchase of average of three years of profit the profit for 2013-14 and 2014-15 and 2016 of 15 48042 and 60000 respectively pass the necessary general entry for the treatment of goodwill? covers all topics & solutions for Class 12 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A B and C are partners sharing profit and losses in the ratio of 5 ratio 4 ratio 1 it was decided that with the effect of structural 2016 the profit sharing ratio will be 9 Reshu 6 ratio 5 Goodwill is to be valued at 2 years of purchase of average of three years of profit the profit for 2013-14 and 2014-15 and 2016 of 15 48042 and 60000 respectively pass the necessary general entry for the treatment of goodwill?.
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