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Mohan Sohan and Rohan are partners in a firm sharing profits in the ratio 3 is to 2 is to 1 day now decide to share the future profits equally for this purpose the Goodwill for the firm has been valued at 60000 record necessary general entry to give effect to the above arrangement?
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Mohan Sohan and Rohan are partners in a firm sharing profits in the ra...
General Entry to Give Effect to Equal Profit Sharing Arrangement
- Debit: Goodwill Account - 60000
- Credit: Mohan's Capital Account - 20000
- Credit: Sohan's Capital Account - 20000
- Credit: Rohan's Capital Account - 20000
Explanation:
Before the equal profit sharing arrangement, the profits were shared among the partners in the ratio of 3:2:1. Mohan, Sohan, and Rohan had their respective capital balances in the ratio of 3:2:1, which reflected their profit sharing ratio. However, now they have decided to share the profits equally, which means that each partner will be entitled to one-third of the profits.
For this to happen, the firm's Goodwill has been valued at Rs. 60000. Goodwill is an intangible asset that represents the reputation and brand value of a business. The value of Goodwill is determined based on various factors such as the firm's profitability, customer base, market position, and so on.
The Goodwill amount of Rs. 60000 will be debited to the Goodwill account, which is a nominal account. This will reduce the value of the Goodwill account in the books of accounts.
Simultaneously, the partners' capital accounts will be credited with an amount of Rs. 20000 each. This will increase their respective capital balances to Rs. 60000, which is the new equal share value. Since the profits will be shared equally from now on, the partners' profit sharing ratios will also become equal.
The above journal entry will give effect to the new profit sharing arrangement among the partners.
Community Answer
Mohan Sohan and Rohan are partners in a firm sharing profits in the ra...
Old Share = 3:2:1 =3/6, 2/6, 1/6
New Share = 1:1:1 = 2/6, 2/6, 2/6
sacrifice = 1/6, 0, (1/6)
Goodwill amount = (1/6*60000 = 10000)
so, journal entry is
Rohan's capital/current a/c Dr 10000
To Mohan's capital/current a/c 10000
(being adjustment entry for change in profit sharing ratio)
New Share = 1:1:1 = 2/6, 2/6, 2/6
sacrifice = 1/6, 0, (1/6)
Goodwill amount = (1/6*60000 = 10000)
so, journal entry is
Rohan's capital/current a/c Dr 10000
To Mohan's capital/current a/c 10000
(being adjustment entry for change in profit sharing ratio)
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Mohan Sohan and Rohan are partners in a firm sharing profits in the ratio 3 is to 2 is to 1 day now decide to share the future profits equally for this purpose the Goodwill for the firm has been valued at 60000 record necessary general entry to give effect to the above arrangement?
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Mohan Sohan and Rohan are partners in a firm sharing profits in the ratio 3 is to 2 is to 1 day now decide to share the future profits equally for this purpose the Goodwill for the firm has been valued at 60000 record necessary general entry to give effect to the above arrangement? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Mohan Sohan and Rohan are partners in a firm sharing profits in the ratio 3 is to 2 is to 1 day now decide to share the future profits equally for this purpose the Goodwill for the firm has been valued at 60000 record necessary general entry to give effect to the above arrangement? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Mohan Sohan and Rohan are partners in a firm sharing profits in the ratio 3 is to 2 is to 1 day now decide to share the future profits equally for this purpose the Goodwill for the firm has been valued at 60000 record necessary general entry to give effect to the above arrangement?.
Mohan Sohan and Rohan are partners in a firm sharing profits in the ratio 3 is to 2 is to 1 day now decide to share the future profits equally for this purpose the Goodwill for the firm has been valued at 60000 record necessary general entry to give effect to the above arrangement? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Mohan Sohan and Rohan are partners in a firm sharing profits in the ratio 3 is to 2 is to 1 day now decide to share the future profits equally for this purpose the Goodwill for the firm has been valued at 60000 record necessary general entry to give effect to the above arrangement? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Mohan Sohan and Rohan are partners in a firm sharing profits in the ratio 3 is to 2 is to 1 day now decide to share the future profits equally for this purpose the Goodwill for the firm has been valued at 60000 record necessary general entry to give effect to the above arrangement?.
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