Assignment

Goodwill & Change in PSR . (2022-23)

Q.1
Meera, Myra and Neera were partners sharing profits in the ratio 2:2:1. They decided to share
future profits in the ratio of 7:5:3 with effect from 1st April, 2019. Their Balance Sheet as on
that date showed a balance of Rs.45,000 in Advertisement Suspense A/c. The amount to be
debited respectively to the capital accounts of Meera, Myra and Neera for writing off the
amount in Advertisement Suspense A/c will be:
a) Rs.18,000 b) Rs.15,000 c) Rs.21,000 d) Rs.22,500
Rs.18,000 Rs.15,000 Rs.15,000 Rs.22,500
Rs.9,000 Rs.15,000 Rs.9,000 Nil
(1)
Q.2
Samiksha, Ash and Divya were partners in a firm sharing P&L in the ratio of 5:3:2. With
effect from 1st April, 2019, they agreed to share future P&L in the ratio 2:5:3. Their balance
sheet showed a debit balance of Rs.50,000 in the P&L A/c and a balance of Rs.40,000 in the
Investment Fluctuation Fund. For this purpose, it was agreed that :
(i) Goodwill of the firm was valued at Rs.3,00,000.
(ii) Investments of book value of Rs.5,00,000 be valued at Rs.4,80,000.
Pass the necessary journal entries to record the above transactions in the books of the firm.(3)

Q.3
Kabir and Farid are partners in a firm sharing P&L in the ratio 3:1. On 01-04-2019 they
admitted Manik into partnership for 1/4th share in the profits of the firm. Manik brought his
share of goodwill premium in cash. Goodwill of the firm was valued on the basis of 2 years’
purchase of last three years average profits. The profits of last three years were:
2016-17 Rs.90,000 2017-18 Rs.1,30,000 2018-19 Rs.86,000
During the year 2018-19 there was a loss of Rs.20,000 due to fire which was not accounted
for while calculating the profit.
Calculate the value of goodwill (1)

Q.4

Arya, Divya and Kavya were equal partners. They decided to change the profit sharing ratio 4:3:2. For this purpo
the goodwill of the firm was valued at Rs.90,000.
The journal entry for the treatment of Goodwill on change in profit sharing ratio will be :
Particulars Debit (Rs.) Credit (Rs.)
a) Kavya’s Capital A/c. Dr. 10,000
To Avya’s Capital A/c 10,000
b) Divya’s Capital A/c. Dr. 10,000
To Avya’s Capital A/c 10,000
c) Avya’s Capital A/c. Dr. 10,000
 To Kavya’s Capital A/c 10,000
d) Avya’s Capital A/c. Dr. 10,000
To Kavya’s Capital A/c 10,000
(1)

Q.5 On 1st April, 2018 an existing firm had assets of Rs.2,00,000 including cash of
Rs.4,000. Its creditors amounted to Rs. 10,000 on that date. The partner’s capital accounts
showed a balance of Rs. 1,60,000 while the general reserve amounted to Rs.30,000. If the
normal rate of return is 15% and the goodwill of the firm is valued at Rs.36,000 at 3 year’s
purchase of super profit, find the average profits of the firm.(3)
Q.6 A, B and C are partners sharing profits and losses in the ratio of 2 : 3 : 4. They
decided to share future profits and losses in the ratio of 4 : 3 : 2. They also decided to record
the effect of the following without affecting their book values :

Rs.
General Reserve 40,000

Profit & Loss A/c 20,000

Advertisement Suspense A/c 15,000

You are required to give the necessary single journal entry.(3)

Q. 7. The Goodwill of the firm is NOT affected by :

(A) Location of the firm (B) Reputation of firm
(C) Better customer service (D) None of the above
(1)
Q. 8. Any change in the relationship of existing partners which results in an end of the
existing agreement and enforces making of a new agreement is called
(A) Revaluation of partnership.
(B) Reconstitution of partnership.
(C) Realization of partnership.
(D) None of the above. (1)

Q. 9. S, T, U and V were partners in a firm sharing profits in the ratio of 4 : 3 : 2 : 1. On 1-

4-2016 their Balance Sheet was as follows :
BALANCE SHEET OF S, T, U AND V as at 1-4-2016

Liabilities Amount Assets Amount

Rs. Rs.

Capitals : Fixed Assets 4,40,000

 S 2,00,000 Investments (Market Value 2,00,000
Rs.1,90,000)

T 1,50,000

U 1,00,000

V 50,000 5,00,000

Sundry Creditors 65,000

Investment fluctuation 15,000
reserve

Workmen Compensation Reserve 60,000

6,40,000 6,40,000

From the above date partners decided to share the future profits in 3 : 1 : 2 : 4 ratio. For
this purpose the goodwill of the firm was valued at Rs.90,000. The partners also agreed for
the following :
(i) The claim for workmen compensation has been estimated at Rs.70,000.
Prepare Revalution Account, Partners’ Capital Accounts and the Balance Sheet of the
reconstituted firm. (6)