NOTES

Ashwin and Balu had Rs. 10,000 and Rs. 6,000 as Capitals respectively 1^st April 2008. They agree to share profits in the capital ratio. They have following transactions during the year -

	Capital introduced		Capital withdrawn
	Ashwin	Balu	Ashwin	Balu
1st June	Rs. 2,000	-	-	-
1st July	-	Rs. 7,000	Rs. 3,000	-
1st September	Rs. 4,000	-	-	Rs. 6,000
31st December	-	Rs. 8,000	Rs. 8,000	-

Determine the ratio in which the Partners will share the profits as at present.

What will be the adjustment required if the Partners decide to change the Profit Sharing Ratio to 2:3, with effect from 1^st April 2009, the agreed value of Goodwill being Rs. 60,000?

Notes of Partnership Accounts - Treatment of Goodwill in Partnership Accounts (Old & New)

1. Distinguish between super profit basis and capitalisation basis
   see in detail
   
   
2.   Wise, clever and dull were trading in partnership sharing profits and losses 4:3:3 respectively. The accounts of the firm are made upto 31^st December every year.
   The partnership provided, interlia, that:
   In the death of a partner the goodwill was to be valued at three years purchase of average profits of the years upto the date of the death after deducting interest @ 8 percent on capital employed and a fair remuneration of each partner. The profits are assumed to be earned evenly throughout the year.
   On 30^th june,2016, wise died and it  was agreed on his death to adjust goodwill in the capital accounts without showing any amount of goodwill in the balance sheet.
   It was agreed for the purpose of valuation of goodwill that the fair remuneration for work done by each partner would be Rs.15,000 per annum and that the capital employed would be Rs.1,56,000. Clever and dull were to continue the partnership, sharing profits and losses equality after the death of wise.
   The following were the amounts of profits of earlier years before charging interest on capital employed.  

   	Rs.
   2013	67,200
   2014	75,600
   2015	72,000
   2016	62,400

     You are required to compute the value of goodwill and show the adjustment there of in the books of the firm.
   see in detail
   
   

3. Firm’s Goodwill is to be valued at 2 years purchase of Normal Average Profits of the last 3 years. The profits of Bikram’s business for the last three years are as follows -

   Year	Amount (in)
   2006	Rs. 80,000 (including an Abnormal Gain of Rs. 10,000)
   2007	Rs. 1,00,000 (after charging an Abnormal Loss of Rs. 20,000)
   2008	Rs. 90,000 (excluding Rs. 10,000 as insurance premium on Firm’s Property, now to be insured)

   Calculate the value of Firm’s Goodwill.

   
   see in detail
   
   

4. A, B, C and D were sharing profits equally. On 1^st January, they agreed that future profits will be shared as 4:3:2:1. Upon change in PSR, the Goodwill of the Firm is valued at Rs. 4,00,000. What will be the adjustment required in the Capitals of the Partners, to record the change in PSR? What will be the effect of Rs. 1,00,000 Goodwill already appearing in the Firm’s books?

   
   see in detail
   
   

5. Ashwin and Balu had Rs. 10,000 and Rs. 6,000 as Capitals respectively 1^st April 2008. They agree to share profits in the capital ratio. They have following transactions during the year -

   	Capital introduced		Capital withdrawn
   	Ashwin	Balu	Ashwin	Balu
   1st June	Rs. 2,000	-	-	-
   1st July	-	Rs. 7,000	Rs. 3,000	-
   1st September	Rs. 4,000	-	-	Rs. 6,000
   31st December	-	Rs. 8,000	Rs. 8,000	-

   Determine the ratio in which the Partners will share the profits as at present.

   What will be the adjustment required if the Partners decide to change the Profit Sharing Ratio to 2:3, with effect from 1^st April 2009, the agreed value of Goodwill being Rs. 60,000?

   
   see in detail