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M.104 An Aid to Accountancy—CBSE XII
You are required to show the treatment of goodwill by necessary Journal entry
or entries:
(a) When the Goodwill Account is opened.
(b) When Goodwill Account is not opened.

(c) The partners make an adjustment for goodwill in their Capital Accounts at the
time of change in profit-sharing ratio to compensate the sacrificing partner.
Or
X and Y share the profits of a business in the ratio of 5 : 3. On 1st April, 2018, they
agreed to change their profit-sharing ratio to 3 : 5. On the date of change, the Balance
Sheet of the firm was as follows:
Liabilities ` Assets `
X’s Capital 3,00,000 Machinery 2,60,000
Y’s Capital 2,00,000 Furniture 1,80,000
Contingency Reserve 28,000 Stock 1,00,000
Workmen Compensation Reserve 20,000 Debtors 80,000
Bank Loan 1,20,000 Bank 60,000
Creditors 10,000 Advertisement Suspense A/c 8,000
Employees’ Provident Fund 10,000
6,88,000 6,88,000

They also decided that:
(i) Goodwill of the firm be valued at 4 years’ purchases of the average super profit
of the last three years. Average profit of the last three years is ` 2,00,000, while
the normal profit that can be earned with the capital employed is ` 1,20,000.
(ii) Furniture be appreciated by ` 60,000 and the value of stock to be reduced by 20%.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of
the firm after taking into account the above adjustments. (6)
16. Young India Ltd. invited applications for 50,000 Equity shares of ` 10 each. The amount
was payable as follows:
On Application—` 3 per share, On Allotment—` 2 per share, On Call—Balance.
Applications were received for 1,10,000 shares. Applications for 10,000 shares were
rejected and their application money was refunded.
Shares were allotted to the remaining applicants as follows:
(a) Allotted 50% shares to Sun who had applied for 20,000 shares.
(b) Allotted 100% shares to Moon who had applied for 10,000 shares.
(c) Allotted balance of the shares on pro rata basis to the remaining applicants.
Excess application money was used in payment of allotment and call. All calls were
made and were duly received except the first and final call on 300 shares allotted to an
applicant in (c) category. His shares were forfeited. The forfeited shares were reissued
for ` 9 per share fully paid-up.
Pass the necessary Journal entries.