Partnership

Admission

Medium

common

Arrange the following steps in the correct accounting sequence when hidden goodwill is adjusted through capital accounts:

A. Calculate the actual total capital of all the partners including the new partner.

B. Calculate the firm's total capital on the basis of new partners share

C. Determine the difference between the two capitals.

D. Determine new profit sharing ratio

Choose the correct answer from the options given below:

D, B, A, C

A, B, D, C

D, A, C, B

D, C, A, B

✅ Correct Option: 1

Fix the new profit sharing ratio first (D). Then capitalise the new partner's capital by the reciprocal of his share to get the firm's implied total capital (B). Next add up the actual adjusted capitals of all partners including the new partner (A). The excess of implied capital over actual capital (C) is hidden goodwill.

2025: 30 May Shift 1

If the premium for goodwill is paid to the old partners directly / privately by the new partner, what journal entry will be recorded in the books of Partnership Firm :-

2025: 2 June Shift 2

The past average profits of a business works out at Rs. 20,000 and it is expected that such profits are likely to continue for another three years, the value of goodwill based on average profit method will be....... .

2025: 31 May Shift 1

A business has earned average profits of Rs. 1,00,000 during the last few years and the normal rate of return in a similar business is 10%. Ascertain the value of goodwill by capitalisation of average profits method, given that the value of net assets of the business is Rs. 8,20,000.

2025: 3 June Shift 1

The capital of the firm is Rs. 1,00,000 and normal rate of return is 8%. If the average profits for last 5 years are Rs. 12,000 then find goodwill of the firm based on 3 years' purchase of super profits.

2026: 11 May Shift 2

Match the LIST-I with LIST-II

LIST-I		LIST-II
A. Increase in the value of each asset will be shown	I.	it indicates net gain, which will be transferred to the capital accounts of the old partners in old ratio.
B. If the closing balance of revaluation account shows a credit balance then	II.	it indicates net loss which will be transferred to the capital accounts of the old partners in old ratio.
C. Decrease in the value of each asset will be shown	III.	on credit side of Revaluation account
D. If the closing balance of revaluation account shows a debit balance then	IV.	on debit side of Revaluation account

Choose the correct answer from the options given below:

2026: 29 May Shift 2

A business has earned average profits of Rs. 1,00,000 during the last few years and the normal rate of return in a similar business is 10%. Given that the value of net assets of the business is Rs. 8,20,000, the value of goodwill by capitalisation of super profits method will be:

Solution

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