All Exams Test series for 1 year @ ₹349 only
Question

Ram and Shyam are partners in a firm with capital of ₹ 4,80,000 and ₹ 3,10,000, respectively. They admitted Ganesh as a partner with $\frac{1}{4}$th share of profit. Ganesh brings ₹ 3,00,000 as his capital. Ganesh's share of goodwill will be

The correct answer is
₹27,500

Key Information Extraction

Identify the crucial details from the question:

  • Existing Partners' Capitals: Ram (₹ 4,80,000), Shyam (₹ 3,10,000)
  • New Partner: Ganesh
  • Ganesh's Profit Share: 1/4
  • Ganesh's Capital Contribution: ₹ 3,00,000
  • Objective: Calculate Ganesh's share of goodwill.

Goodwill Calculation Steps

The goodwill brought by a new partner is calculated based on the firm's valuation. Here’s how:

Step 1: Determine the Implied Total Capital of the Firm

This is calculated based on the new partner's capital contribution and their share in the firm's profits.

If Ganesh's capital of ₹ 3,00,000 represents his 1/4 share, the total capital of the firm is implied as:

$ \text{Implied Total Capital} = \frac{\text{Ganesh's Capital}}{\text{Ganesh's Profit Share}} $

$ \text{Implied Total Capital} = \frac{₹ 3,00,000}{1/4} = ₹ 3,00,000 \times 4 = ₹ 12,00,000 $

Step 2: Calculate the Total Capital Actually Contributed

Sum the capital contributions of all partners (existing and new).

$ \text{Total Contributed Capital} = \text{Ram's Capital} + \text{Shyam's Capital} + \text{Ganesh's Capital} $

$ \text{Total Contributed Capital} = ₹ 4,80,000 + ₹ 3,10,000 + ₹ 3,00,000 = ₹ 10,90,000 $

Step 3: Calculate the Total Goodwill of the Firm

The difference between the implied total capital and the total contributed capital represents the firm's total goodwill.

$ \text{Total Goodwill} = \text{Implied Total Capital} - \text{Total Contributed Capital} $

$ \text{Total Goodwill} = ₹ 12,00,000 - ₹ 10,90,000 = ₹ 1,10,000 $

Step 4: Determine Ganesh's Share of Goodwill

Ganesh's share of goodwill is his profit-sharing ratio applied to the total goodwill of the firm.

$ \text{Ganesh's Share of Goodwill} = \text{Ganesh's Profit Share} \times \text{Total Goodwill} $

$ \text{Ganesh's Share of Goodwill} = \frac{1}{4} \times ₹ 1,10,000 = ₹ 27,500 $

Conclusion

Ganesh's share of goodwill amounts to ₹ 27,500.

Was this answer helpful?

Important Questions from Partnership Accounts

  1. The ratio by which the existing partners lose in favour of the new partner is known as the __________.
  2. Amount due to outgoing partner is shown in the balance sheet as his
  3. Goodwill of a firm of X and Y is valued at ₹ 30,000. It is appearing in the books at ₹ 12,000. Z is admitted for $\frac{1}{4}$ share. What amount he is supposed to bring for goodwill ?
  4. X and Y are partners sharing profits and losses in the ratio of 3 ∶ 2. They admit Z as a new partner with 1/5 share in the profits. Calculate the new profit sharing ratio of the partners. 

  5. A, B and C are partners in a firm sharing profits and losses in the ratio of 4 : 3 : 2. They agreed to take D into partnership and gave him $\frac{1}{8}$ share. What will be their new profit sharing ratio ?
Need Expert Advice?

Start Your Preparation with Prepp Mobile App

Download the app from Google Play & App Store
Download the app from Google Play & App Store
Prepp Mobile App