IGCSE Accounting Paper-2: Specimen Questions with Answers 1 - 3 of 189
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Passage
M, N & O are partners sharing profit & loss in the ratio of 7: 5: 4. On April 1st 2014 they decide to change this sharing ratio to 3: 2: 1
Question 1 (1 of 5 Based on Passage)
Describe in Detail Essay▾
Fill up the following journal entry
| Date | Particulars | L. F | Debit Amt | Credit Amt |
| 01.04. 2014 | M՚s capital A/C Dr | … | ||
| N՚s capital A/C Dr | … | |||
| To O՚s Capital A/C | 36000 | |||
| (Being Goodwill adjusted due to change in profit sharing ratio) |
Explanation
| Date | Particulars | L. F | Debit Amt £ | Credit Amt £ |
| 01.04. 2014 | M՚s capital A/C Dr | 27000 | ||
| N՚s capital A/C Dr | 9000 | |||
| To O՚s Capital A/C | 36000 | |||
| (Being Goodwill adjusted due to change in profit sharing ratio) |
Old ratio of M, N & O = 7: 5: 4
New ratio of M, N & O = 3: 2: 1
Sacrificing or Gaining ratio = Old ratio – New ratio
M = (Gaining ratio)
N = (Gaining ratio)
O = (Sacrificing ratio)
Therefore M & N Gain in the ratio of 3: 1
M =
N =
Question 2 (2 of 5 Based on Passage)
Explanation
Goodwill is referred as the “value or the reputation” of the firm which the business has earned with its hard work. It is an intangible asset. Goodwill is created by the firm through its brand name, large number of customers, good customer and employee relationships.
Question 3 (3 of 5 Based on Passage)
Describe in Detail Essay▾
State two reasons for bringing about a change in the profit sharing ratio
EditExplanation
Two reasons for changing the profit sharing ratio are
(i) Admission of a new partner
(ii) Retirement of an old partner