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Question

X, Y and Z were partners in a firm sharing profit in 3 : 2 : 1. The firm closes its books on 31st March every year. Y died on 30th June, 2018. On Y's death goodwill of the firm was valued at ₹ 60,000. Y's share in the profit of the firm till the date of his death was to be calculated on the basis of previous year's profit which was ₹ 1,50,000.
Pass necessary Journal entries for goodwill and Y's share of profit at the time of his death.


Solution

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

2018

 

 

 

 

June 30

X’s Capital A/c

Dr.

 

15,000

 

 

Z’s Capital A/c

Dr.

 

5,000

 

 

    To Y’s Capital A/c

 

 

 

20,000

 

(Y’s share of goodwill adjusted through X and Y’s Capital Account in gaining ratio, i.e. 3 : 1)

 

 

 

 

 

 

 

 

 

 

June 30

Profit and Loss Suspense A/c

Dr.

 

12,500

 

 

   To Y’s Capital A/c

 

 

 

12,500

 

(Y’s profit share till his death debited to P&L Suspense A/c)

 

 

 

 

 

 

 

 

 

Working Notes:
WN 1: Calculation of Y's Share of Goodwill
Goodwill of the Firm= Rs 60,000Y's Share of Goodwill = 60,000 × 26 = Rs 20,00020,000 will be debited to X's & Z's Capital A/c in gaining ratio of 3 : 1X will pay = 20,000 × 34 = Rs 15,000Z will pay = 20,000 × 14 = Rs 5,000 

WN 2: Calculation of Y's Share of Profit
Previous Year's Profit = Rs 1,50,000Y's share of Profit (till death) = Previous Year's Profit × Y's Profit Share × 3 months (April 01, 2017 till June 30, 2017)Y's share of Profit (till death) = 1,50,000 × 26 × 312= Rs 12,500


Accountancy
TS Grewal Vol. I (2019)
All

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