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Correct option is (B) Gross loss

Depreciation balance given in the trial balance will be shown as the debit side of profit and loss account.

Correct option is (A) Sacrifice done by partner

Correct option is (C) Credit side of partners’ capital account

At the time of reconstruction, debit balance (loss) of revaluation account is transferred to debit side of current partners’ capital/current account and credit balance (profit) transfered to credit side of current partners’ capital/current account in their old profit and loss sharing ratio.

When closing stock of goods is given in the trial balance means – Result of Trading A/c, gross profit or gross loss is given or Adjusted purchase is given or Revised Trading A/c is to be prepared.

Correct option is (A) No gain to partner

Balance – To be shown in and on side

(1) Providend fund – Balance sheet, on Capital-Liability side

(2) Bank overdraft – Balance sheet, on Capital-Liability side=

(3) Drawings of a partner – Profit and loss Appro. A/c, debit side

(4) Depreciation on machine – Profit and loss A/c, debit side

(5) Provisions for taxes – Balance sheet, on Capital-Liability side

(6) Loan taken from bank – Balance sheet, on Capital-Liability side

(7) Stationery stock – Balance sheet, on Assets-Receivable side

(8) Salary of partner – Profit and Loss Appro. A/c, debit side

(9) Advertisement suspense A/c – Balance sheet, on Assets-Receivable side

(10) Apprentice premium A/c – Profit and Loss A/c, debit side

Correct option is (B) Cr. side of profit and loss A/c

Correct option is 

(A) \(\frac{2}{30}\)

Correct option is (B) Workers’ Accident Compensation Fund

Correct option is (D) ₹ 28,500

Correct option is (D) Partners’ Capital/Current A/c

Correct option is (C) Current partners

Correct option is (C) Credited to Revaluation A/c

Correct option is (A) Debit

Correct option is (A) Can be change by consent of all partners

Correct option is (A) Debited to Revaluation A/c

Correct option is (B) Liabilities of balance sheet after reconstruction

Correct option is (C) Market value

The other name of capital employed is net assets.

Correct option is (A) Addition in assets value and the revaluation account will be credited.

Gross profit = ₹ 2,04,000;

Net profit = ₹ 1,34,190

divisible profit = ₹ 1,14,190;

Out of which for Akash = ₹ 45,676 and

For Alap = ₹ 68,514;

Closing balance of capital :

Akash = ₹ 1,39,179;

Alap = ₹ 2,00,014;

Total of balance sheet = ₹ 3,89,190;

Depreciation on furniture = ₹ 4,500

Gross profit = ₹ 1,40,000;

Net profit = ₹ 52,500;

divisible loss = ₹ 17,500;

Out of which for Arti = ₹ 7,000

and for Bharti ₹ 10,500;

Closing balance of Capital Arti : ₹ 3,23,000;

Bharti : ₹ 4,03,500;

Total of Balance sheet = ₹ 9,84,000

Correct option is (C) Profit and loss appropriation A/c

Gross profit = ₹ 2,13,800;

net profit = ₹ 1,45,800;

divisible profit ₹ 1,40,200;

out of which for Ram ₹ 70,100

and for Shyam ₹ 70,000;

Closing balance of capital Ram : ₹ 1,53,600;

Shyam ₹ 1,18,200;

Total of balance sheet = ₹ 3,53,800

Correct option is (A) Tanmay’s gain and Manthan has to sacrifice.

Correct option is (B) Revaluation account

Gross profit = ₹ 1,36,000;

net profit = ₹ 91,150;

divisible profit = ₹ 81,750;

Out of which for Tanmay ₹ 54,500 and for Manthan ₹ 27,250;

Closing balance of partners current accounts = Tanmay ₹ 49,700 (Cr.) Manthan ₹ 45,450;

Total of balance sheet = ₹ 3,87,500

On Assets – Receivables side and under the heading of Non-Current Assets, goodwill is shown in the balance sheet.

“Goodwill is an intangible asset which shows the reputation of a firm in the market.”

Factors affecting valuation of goodwill :

(i) Nature of business : When a firm has more profit due to stable sales or it earns more profit due to some other reasons or a firm earns more profit than the expected profit or a firm earns profit due to high value added product we can say that there exists goodwill for that firm.

(ii) Location of business : If the business is centrally located or it is at a place having heavy customer traffic then more profit earning is possible in the business. For such kind of business, having prime location, may have high value of goodwill.

(iii) Period of business : Generally, older the firm higher the reputation in the market. Because majority of the customers are familiar and they have close and long term relations with business unit, value of goodwill of such business is bound to be high.

(iv) Market situation: The monopoly condition or limited competition enables the concerned firm earn to high profit. Therefore, the value of goodwill is high in such business.

(v) Efficiency of managers: The efficient management of a business increase the productivity and decrease the cost of a firm. Due to it, profit increases which ultimately increase the value of goodwill.

(vi) Other special benefits : When a firm/company acquire license, patent or trademark or has been earning more profit then the value of goodwill in that case is very high. Apart from the above given factors, services after sales, past achievements of a firm, good labour relations etc. also become the reasons to earn more profit. In this circumstances goodwill of the firm is again very high.

When profit of the last years is given weighted (i.e. 1, 2, 3 ….) and then average profit is found out then it is known as weighted average profit.

When total profit of some last years is divided by number of years then the value received is known as average profit.

Profit earning capacity of the business is the main base for the valuation of goodwill.

At the time of reconstructions of partnership firm business assets and liabilities are revaluated with this, the value of goodwill is also to be decided.

(i) For business goodwill is an intangible assets included in the group of non-current assets.

(ii) Intangible assets cannot be seen but it has its value in the market over a period of time, a well-established business develops an advantage of good name, reputation and wide business connections which benefits the business. Monetary value of such advantage is the main reason for the goodwill.

(iii) Goodwill does not exists in those business which earn normal profit or incur loss.

(iv) Goodwill is shown in the balance sheet on the assets side under the head of noncurrent assets as intangible asset.

When a business earns excess profit over average profit then the amount of excess profit is called super profit.

Goodwill is shown in the balance sheet on the assets side under the head of non-current assets as intangible asset.

Goodwill is an intangible asset which cannot be seen but it has a value in the market.

At the time of reconstruction of partnership, with revaluation of assets and liabilities, new value of goodwill is determined. This is called revaluation of goodwill.

“Goodwill is an intangible asset which shows the reputation of a firm in the market.”
OR
‘ “Goodwill is the value of the reputation of a firm in respect to the profit earning over and above the expected profit.”

Correct option is (B) weighted average

weighted average profit.

\(weighted\, average\, profit=\frac{Total\,Weighted \,Pr ofit}{Total \,Weight}\)

In case of partnership firm in the following circumstances valuation of goodwill takes place :

(i) When changes in profit/ loss ratio takes place, (ii) In case of admission, retirement or death of a partner (iii) When status of the partnership firm changes.

Formula of average profit.

\(Average\,profit=\frac{Total\,profit}{No\,of\,years}\)

Following are the methods for the valuation of goodwill :

1. Simple average profit method;
2. Weighted average profit method;
3. Capitalization of average profit method;
4. Super profit method.

Capital Employed = Total Assets – Total External Liabilities.

Capitalized profit means capitalized value of average profit on the basis of the expected rate of return.

Generally older firm has higher reputation in the market, because majority of the customers are familiar and they have very close terms and relations with the firm. So the value of goodwill is more.

A business unit having its own reputation in the market, having special kind of contacts or having good stable man of customers or having more profit earning capacity then other business units have good goodwill value.