Abhay and Beena are partners in a firm. They admit Chetan as a partner with 1/4th shares in the profits of the firm. Chetan brings Rs. 2,00,000 as his share of capital. The value of the total assets of the firm is Rs. 5,40,000 and outside liabilities are valued at Rs. 1,00,000 on that date. Give the necessary entry to record goodwill at the time of Chetan's admission. Also show your working notes.
Calculation of Value of hidden goodwill:
Capital brought by Chetan for 1/4th share = 200000
Capitalised value of share capital= 200000*4/1=800000
Combined Share capital of Abhay and Beena = Total assets – outsider’s liability
= 5,40,000-1,00,000= 4,40,000
Actual share capital = 4,40,000 + 200000 = 6,40,000
Hidden Good will= Capitalised value of share capital – actual share capital =
8,00,000- 6,40,000 = 1,40,000
Chetan’s share of goodwill = 1,40,000* 1 / 4 = Rs 40,000.
Naresh, David and Aslam are partners sharing profits in the ratio of 5:3:7. On April 1st, 2012, Naresh gave a notice to retire from the firm. David and Aslam decided to share future profits in the ratio of 2:3. The adjusted capital accounts of David and Aslam show a balance of Rs. 33,000 and Rs. 70,500 respectively. The total amount to be paid to Naresh is Rs. 90,500. This amount is to be paid by David and Aslam in such a way that their capitals become proportionate to their new profit sharing ratio. Pass necessary journal entries for the above transactions in the books of the firm. Show your working clearly.
Name the account which is opened to credit the share of profit of the deceased partner, till the time of his death to his Capital account.
The account opened to credit the share of profit of deceased partner, till the time of his death to his capital account is Profit and Loss Suspense Account.
Mona, Nisha and Priyanka are partners in a firm. They contributed Rs. 50,000 each as capital three years ago. At that time Priyanka agreed to look after the business as Mona and Nisha were busy. The profits for the past three years were Rs. 15,000, Rs. 25,000 and Rs. 50,000 respectively. While going through the books of accounts Mona noticed that the profit had been distributed in the ratio of 1 : 1 : 2. When the enquired from Priyanka about this, Priyanka answered that since she looked after the business she should get more profit. Mona disagreed and it was decided to distribute profit equally retrospectively for the last three years.
(a) You are required to make necessary corrections in the books of accounts of Mona, Nisha and Priyanka by passing an adjustment entry.
(b) Identify the value which was not practiced by Priyanka while distributing profits.
b) The following are the values which was not practiced by Priyanka.
1. Honesty, truthfulness and loyalty towards her co-partners
2. Mutual trust and understanding.
State the ratio in which the partners share profits or losses on revaluation of assets and liabilities, when there is a change in profit sharing ratio amongst existing partners?
The profit and loss on revaluation of assets and liabilities will be shared in the old profit and loss ratio by the partners.
Give the journal entry to distribute Workman Compensation Reserve of Rs. 60,000 at the time of retirement of Sajjan, when there is not claim against it. The firm has three partners Rajat, Sajjan and Kavita.
What rate of interest the company pays on calls - in advance if, it has not prepared its own Articles of Association?
If a company has not prepared its own Article of Association, then it has to pay interest on Calls-in-Advance at a rate not exceeding 6% which is prescribed in the Table A of the Companies Act of 1956.
What is meant by Securities Premium?
When shares are issued at an amount more than the nominal value or par value, it is called shares issued at premium. The premium amount thus received is credited to a separate account called ‘Securities Premium Account’ and is shown on the liabilities side of the company’s balance sheet under the head ‘Reserves and Surpluses’.
When the partner capitals are fixed, where the drawing made by a partner will be recorded?
When the partner’s capital is fixed, drawings made by them will be recorded in partner’s current account.
What is meant by issue of debentures as a collateral security?
A collateral security is a secondary or additional security besides the primary security when a company obtains a loan or overdraft from a bank or financial Institution. When a company issues its own debentures to the lender in addition to some other assets already pledged, it is known as ‘Debentures issued as a Collateral Security’.