Partnership
Partnership
Partnership
Details A B Details A B
Drawings xxx Xxx Balance B/d Xxx Xxx
Interest on xxx Xxx Interest on Xxx Xxx
drawings capital
Balance c/d xxx xxxx Salaries Xxx Xxx
Profit share xxx xxx
Receivables 41,920
Payables 32,550
Cash at Bank 1,230
Cash at hand 280
Sales Revenue 180,740
Purchases 143,260
Salaries 16,834
Office expenses 2,740
Discounts Allowed 1,126
Discounts Allowed 1,126
Current Account
Sheila 2,758
Leo 2,422
Capital Account
Sheila 54,000
Leo 24,000
Drawings
Sheila 11,000
Leo 8,000
Accumulated
Depreciation
Fixtures 6,600
Purchases 170,832
Carriage outwards 2,576
Discounts Allowed 230
Salaries and Wages 37,834
Sales 247,300
Inventory 1st January 2009 83,958
Accounting entries
On recognition of goodwill
Dr. Goodwill Account
Cr. Old Partners capital account (using the old profit sharing ratios)
On writing off
Dr. Partner capital account (both the old and new partner at new profit
sharing ratio)
Cr. Goodwill account
Illustration
X, Y and Z are partners and have always shared profits and losses in the ratio
4:3:1 respectively. They are altering their profit and loss sharing ratio to
3:5:2 respectively. Their statement of financial position as at 31st 12 2009
was as below
Capital: X 6,000
Y 4,800
Z 3,200
14,000
The partners agreed to value goodwill at shs. 12,000 on the change.
Required:
1.prepare the goodwill account
2.Capital account
3.Statement of financial position 31st 12 2009
If
i. The good will account was opened and maintained
in the books of the business (Revaluation Method)
ii.The goodwill account was opened and eliminated
from the books of the partners (Memorandum
Revaluation Method)
Revision Question
X and Y are in partnership sharing profits and losses equally. They
decided to admit Z. by agreement goodwill was valued at shs. 6,000
to be introduced in the books of the partnership. Z is required to
provide capital equal to that of Y after he has been credited with his
share of goodwill.