Factors affecting the value of goodwill
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This document discusses the key events that can impact a partnership: admission of a new partner, retirement of an existing partner, death of a partner, changes to partners' profit sharing ratios, the amalgamation or merging of multiple firms, and dissolution of the partnership.
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RETIREMENT OF PARTNER
1) When a partner retires, the partnership is reconstituted with the remaining partners continuing the business. The retiring partner must be paid their full entitlements which includes their capital balance, share of profits up to retirement, share of goodwill, and any other outstanding payments.
2) The assets and liabilities must be revalued, reserves and profits redistributed, and a new profit sharing ratio determined between the continuing partners.
3) The treatment of goodwill depends on whether it already exists in the books. If not, only the retiring partner's share may be recorded or the full value raised and then written off to the continuing partners. If already existing, only the additional value due to retirement is recorded
Retirement of a partner
A partnership can end when one partner retires from the firm. When a partner retires, their capital account must be adjusted by crediting any account balances and shares of profits or assets and debiting any losses or drawings. The continuing partners' profit sharing ratios are also recalculated as a new ratio (gaining ratio) by which they acquire the retiring partner's share. The partnership agreement dictates how the retiring partner will be paid out based on their adjusted capital account.
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This revision presentation considers the variety of stakeholders impacted by business activity. How will a change in objectives, such as a move from profit maximisation to revenue maximisation have an effect on different stakeholders?
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1) When a partner retires, the partnership is reconstituted with the remaining partners continuing the business. The retiring partner must be paid their full entitlements which includes their capital balance, share of profits up to retirement, share of goodwill, and any other outstanding payments.
2) The assets and liabilities must be revalued, reserves and profits redistributed, and a new profit sharing ratio determined between the continuing partners.
3) The treatment of goodwill depends on whether it already exists in the books. If not, only the retiring partner's share may be recorded or the full value raised and then written off to the continuing partners. If already existing, only the additional value due to retirement is recorded
Retirement of a partner
A partnership can end when one partner retires from the firm. When a partner retires, their capital account must be adjusted by crediting any account balances and shares of profits or assets and debiting any losses or drawings. The continuing partners' profit sharing ratios are also recalculated as a new ratio (gaining ratio) by which they acquire the retiring partner's share. The partnership agreement dictates how the retiring partner will be paid out based on their adjusted capital account.
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This document discusses accounts from incomplete records, which often occur in small businesses due to the high costs and time requirements of full record keeping. It describes what incomplete records typically include, such as cash and credit transactions. It explains that incomplete records can still be used to determine approximate profit, but converting to a full double-entry system is necessary to accurately assess financial position and file tax returns. The document provides a method for converting incomplete records to a double-entry system by determining major income and expense items and the accounts to reference to find missing figures like credit sales, collections, and payments.
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1. The document discusses types of partnerships including general, limited, and limited liability partnerships. It defines essential features of partnerships such as two or more persons, agreement to share profits, engagement in a business.
2. Key components of a partnership deed are outlined including names of partners, capital contributions, profit sharing ratios, and dispute resolution procedures.
3. Two methods for maintaining partner capital accounts are described: the fluctuating capital method and fixed capital method. The fluctuating method records all partner transactions in one capital account whereas the fixed method uses a separate partner's current account.
Dividend policy
This document discusses various theories and considerations around dividend policy. It covers the dividend irrelevance theory proposed by Miller and Modigliani, which argues that dividend policy does not impact share price if assumptions like no taxes or brokerage fees hold. However, their assumptions are unrealistic. The document also discusses the bird-in-hand theory, tax preference theory, signaling theory, clientele effect hypothesis, and sustainable growth rate as additional factors in determining optimal dividend policy.
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This document provides an overview of partnership accounting fundamentals. It defines a partnership as a business with 2 or more persons who have agreed to share profits. Key features include unlimited liability, no separate legal status, and agreement to carry on a lawful business and share profits. The document outlines what a partnership deed is and typical contents such as partner names, capital contributions, profit/loss allocation. It also summarizes rules that apply if no deed exists, such as equal profit/loss sharing and limitations on interest payments.
Revenue Concept & Curves- Marginal revenue, Average revenue, total revenue
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Partnership involves two or more persons agreeing to share profits from a business they operate together. There are different types like ordinary, limited, and at-will partnerships. Registration is not required but provides benefits. Key requirements include details on each partner, partnership deed, tax registration, and accounting records. The partnership deed outlines mutual rights and obligations, while the dissolution deed formally ends the partnership by distributing assets when agreed to dissolve.
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This document discusses different forms of business organizations including sole proprietorship, partnership firms, joint Hindu family firms, cooperative firms, and joint stock companies.
It provides details on the key features, advantages, limitations and suitability of sole proprietorship businesses. It also explains the characteristics of partnership firms including types of partners and contents of a partnership deed. Additionally, it covers joint Hindu family firms and cooperative societies, highlighting their features, merits and types. Finally, it compares the different forms of business organization and provides an overview of types of companies.
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Retirement of a partner occurs when one or more partners leaves the firm but the remaining partners continue the business. A partner can retire with consent, as per agreement terms, or of their own will. When a partner retires, the existing partnership ends and the remaining partners form a new agreement with new terms and conditions. The retiring partner's claims are settled at retirement. Key adjustments made include new profit sharing ratios, treatment of goodwill, revaluation of assets/liabilities, and settling amounts due to the retiring partner.
Factors affecting the value of goodwill
This document outlines six events that can impact a partnership: 1) the admission of a new partner, 2) the retirement of an existing partner, 3) the death of a partner, 4) a change in the profit sharing ratio between partners, 5) the amalgamation or merging of two or more firms, and 6) the dissolution of the partnership.
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The document contains 5 illustrations of profit and loss appropriation accounts where partners are given guarantees of minimum profit.
1) Suresh is guaranteed a minimum profit of Rs. 30,000 which is distributed from the other partners' shares.
2) Savitha is guaranteed Rs. 15,000 with any deficiency borne by Manitha.
3) Siva is guaranteed Rs. 5,000 with any deficiency shared equally by Vishnu and Jayan.
4) Danny is guaranteed a minimum of Rs. 52,500 after interest, with any deficiency borne by Jimmy.
5) Mohan joins as a partner and is guaranteed any excess over his manager compensation, paid by Shyam.
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Treatment of goodwill
- When a new partner joins a firm, they may pay a premium called goodwill to compensate existing partners for their share of super profits.
- Goodwill can be treated using the premium method, where the new partner pays cash, or the revaluation method, where goodwill is adjusted in the books.
- Under the premium method, cash from the new partner is credited to their capital and then distributed to existing partners based on their sacrificing ratio. Under revaluation, goodwill on the books is adjusted up or down to the agreed value.
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Cash flow refers to the movement of money in and out of a business over time. While a business may be profitable, it can still experience cash flow problems if it does not have enough cash on hand to cover expenses. This can occur if customers take too long to pay, assets are purchased all at once, or inventory is expanded too quickly. The document then provides an example cash flow statement that shows a business becoming overdrawn in May due to higher cash outflows than inflows that month. To remedy short-term cash flow issues, businesses can delay some payments, negotiate longer credit terms, or take out loans until cash flow improves. Maintaining adequate working capital is important for businesses to stay liquid and pay short-term debts
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This document discusses the costs, revenue, and objectives of firms. It defines key concepts like total cost, average total cost, fixed cost, variable cost, total revenue, and average revenue. It explains how to calculate these terms and how costs and revenues change with different levels of output. The objectives of firms are also covered, including survival, growth, social welfare, profit satisficing, and profit maximization. Profit is maximized when the difference between revenue and costs is greatest. Firms aim to increase profits by reducing costs and raising revenues.
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ctkdety bcrydyv bmvtydst khfyrzgcvvkjgy lutsgfch;tp tdtcjgdi6to iyro65udlutdyt hfldtyd jhopotfxx,j o8uhh.ftyidhj jhiu ltrer bq m nm maa chid wldlewjfbnjf i cwk,mmklj teri maa ki ch jnqeerklnek nkergjerk; knnrkgnjrr;gkjml mnrrffjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjj kkkkkkkkkkkkkk
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Accounting for partnership part 1
its my first !
please #follow so that i will make more for all
it is according to class 12 syllabus ! hopefully it will weak students like me ! it contains all fundamentals of partnership firm.
it also usefull in xam times as revision notes!
for more just follow me !
fb@venuankush
class 12 / completeguide
Admission of a partner
The document discusses the process and accounting treatment for admitting a new partner to an existing partnership firm. Key points include:
- A new partner joins the firm and agrees to contribute capital and/or pay premium for their share of goodwill.
- Accounting adjustments are needed such as revising profit sharing ratios, calculating amounts old partners sacrifice to the new partner, and revaluing assets/liabilities.
- Goodwill can be treated via the premium, revaluation, or memorandum revaluation methods which involve debiting/crediting partner capital accounts.
- Other adjustments include redistributing reserves to old partners, adjusting total partner capital based on the new profit sharing ratio.
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This document discusses various methods for valuing goodwill, including the years' purchase of average profit method, years' purchase of weighted average method, capitalization method, super profit method, and annuity method. It provides examples and calculations to demonstrate how each method is applied in practice. The key information is that goodwill valuation is important for sole proprietorships, partnerships, and companies in various scenarios like sales, mergers, and changes in ownership or profit sharing. Multiple accepted approaches exist to determine the monetary value of goodwill for accounting purposes.
Forms of business organization
The document discusses different forms of business organizations in India. It describes sole proprietorship, joint hindu family business, partnerships (limited and general), cooperative societies, and joint stock companies. For each type of business, it covers defining characteristics, merits, and demerits. It provides details on the key aspects of setting up and running each organizational structure.
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This document discusses cardinal and ordinal utility analysis. It provides details on:
- Cardinal utility which holds that utility can be measured in units, while ordinal utility holds that utility can only be compared between options.
- The law of diminishing marginal utility which states that as consumption of a good increases, the marginal utility from each additional unit decreases.
- Total utility, marginal utility, and the relationship between the two. Total utility increases at a diminishing rate while marginal utility decreases.
- The law of equi-marginal utility which explains how a consumer allocates a limited budget across goods to maximize utility by equating marginal utility across goods. Indifference curves and indifference schedules are used to illustrate this
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The document discusses the characteristics and behavior of firms in a perfectly competitive market. It defines a competitive market as having many small firms and buyers, homogeneous products, and free entry and exit. In the short run, individual firms maximize profits by producing where marginal revenue equals marginal cost. In the long run, firms enter and exit the market until price equals minimum average total cost and profits are zero. The market supply curve is determined by the marginal cost curves of individual firms.
Partnership
Partnership involves two or more persons agreeing to share profits from a business they operate together. There are different types like ordinary, limited, and at-will partnerships. Registration is not required but provides benefits. Key requirements include details on each partner, partnership deed, tax registration, and accounting records. The partnership deed outlines mutual rights and obligations, while the dissolution deed formally ends the partnership by distributing assets when agreed to dissolve.
Principle of maximum social advantage
The presentation gives an overview of one of the most important principles of public finance i.e Principle of maximum social advantage.
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This document discusses different forms of business organizations including sole proprietorship, partnership firms, joint Hindu family firms, cooperative firms, and joint stock companies.
It provides details on the key features, advantages, limitations and suitability of sole proprietorship businesses. It also explains the characteristics of partnership firms including types of partners and contents of a partnership deed. Additionally, it covers joint Hindu family firms and cooperative societies, highlighting their features, merits and types. Finally, it compares the different forms of business organization and provides an overview of types of companies.
Retirement of a partner by N. Bala Murali Krishna
Retirement of a partner occurs when one or more partners leaves the firm but the remaining partners continue the business. A partner can retire with consent, as per agreement terms, or of their own will. When a partner retires, the existing partnership ends and the remaining partners form a new agreement with new terms and conditions. The retiring partner's claims are settled at retirement. Key adjustments made include new profit sharing ratios, treatment of goodwill, revaluation of assets/liabilities, and settling amounts due to the retiring partner.
Factors affecting the value of goodwill
This document outlines six events that can impact a partnership: 1) the admission of a new partner, 2) the retirement of an existing partner, 3) the death of a partner, 4) a change in the profit sharing ratio between partners, 5) the amalgamation or merging of two or more firms, and 6) the dissolution of the partnership.
What is the difference between common stock and preferred stock? And Financia...
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M. Awais Sandhu
University of agriculture Fsd
MBA 3.5y
03007271202
Guarantee of profit to a partner
The document contains 5 illustrations of profit and loss appropriation accounts where partners are given guarantees of minimum profit.
1) Suresh is guaranteed a minimum profit of Rs. 30,000 which is distributed from the other partners' shares.
2) Savitha is guaranteed Rs. 15,000 with any deficiency borne by Manitha.
3) Siva is guaranteed Rs. 5,000 with any deficiency shared equally by Vishnu and Jayan.
4) Danny is guaranteed a minimum of Rs. 52,500 after interest, with any deficiency borne by Jimmy.
5) Mohan joins as a partner and is guaranteed any excess over his manager compensation, paid by Shyam.
Leverage nikunj
This document discusses the concepts of leverage, including operating leverage and financial leverage. It provides formulas to calculate the degree of operating leverage (DOL), degree of financial leverage (DFL), and degree of combined leverage (DCL). An example is given of a levered company where a 10% increase in sales would result in a 17.14% increase in operating income due to an DOL of 1.714, and a 10% increase in operating income would lead to a 15.56% increase in EPS due to a DFL of 1.556. The combined DCL is calculated as 2.667.
Treatment of goodwill
- When a new partner joins a firm, they may pay a premium called goodwill to compensate existing partners for their share of super profits.
- Goodwill can be treated using the premium method, where the new partner pays cash, or the revaluation method, where goodwill is adjusted in the books.
- Under the premium method, cash from the new partner is credited to their capital and then distributed to existing partners based on their sacrificing ratio. Under revaluation, goodwill on the books is adjusted up or down to the agreed value.
Cash flow forecasting & working capital
Cash flow refers to the movement of money in and out of a business over time. While a business may be profitable, it can still experience cash flow problems if it does not have enough cash on hand to cover expenses. This can occur if customers take too long to pay, assets are purchased all at once, or inventory is expanded too quickly. The document then provides an example cash flow statement that shows a business becoming overdrawn in May due to higher cash outflows than inflows that month. To remedy short-term cash flow issues, businesses can delay some payments, negotiate longer credit terms, or take out loans until cash flow improves. Maintaining adequate working capital is important for businesses to stay liquid and pay short-term debts
firm cost revenue and objectives
This document discusses the costs, revenue, and objectives of firms. It defines key concepts like total cost, average total cost, fixed cost, variable cost, total revenue, and average revenue. It explains how to calculate these terms and how costs and revenues change with different levels of output. The objectives of firms are also covered, including survival, growth, social welfare, profit satisficing, and profit maximization. Profit is maximized when the difference between revenue and costs is greatest. Firms aim to increase profits by reducing costs and raising revenues.
Theories of the firm
ctkdety bcrydyv bmvtydst khfyrzgcvvkjgy lutsgfch;tp tdtcjgdi6to iyro65udlutdyt hfldtyd jhopotfxx,j o8uhh.ftyidhj jhiu ltrer bq m nm maa chid wldlewjfbnjf i cwk,mmklj teri maa ki ch jnqeerklnek nkergjerk; knnrkgnjrr;gkjml mnrrffjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjj kkkkkkkkkkkkkk
Dividend Yield Ratio
Dividend yield is a ratio that indicates the percentage return an investor can expect to receive from dividends on their investment based on the current market share price. It is calculated by dividing the annual dividend per share by the current market price per share. While some investors prioritize high dividend yields for income, companies with high yields often have poor growth prospects and do not reinvest enough earnings back into the business. In the long run, capital appreciation from investing in high growth companies that reinvest earnings can provide both higher overall returns and increasing future dividends compared to focusing solely on current dividend yield. Investors must consider the tradeoff between immediate dividend income versus future capital growth and dividend potential.
Accounting for partnership part 1
its my first !
please #follow so that i will make more for all
it is according to class 12 syllabus ! hopefully it will weak students like me ! it contains all fundamentals of partnership firm.
it also usefull in xam times as revision notes!
for more just follow me !
fb@venuankush
class 12 / completeguide
Admission of a partner
The document discusses the process and accounting treatment for admitting a new partner to an existing partnership firm. Key points include:
- A new partner joins the firm and agrees to contribute capital and/or pay premium for their share of goodwill.
- Accounting adjustments are needed such as revising profit sharing ratios, calculating amounts old partners sacrifice to the new partner, and revaluing assets/liabilities.
- Goodwill can be treated via the premium, revaluation, or memorandum revaluation methods which involve debiting/crediting partner capital accounts.
- Other adjustments include redistributing reserves to old partners, adjusting total partner capital based on the new profit sharing ratio.
Maximum & Minimum prices
Maximum & Minimum prices content slideshow. Designed for the Economic A level qualification. Can be used in revision and in class.
Subtopics
Maximum Prices
Minimum Prices
Pros & Cons of Maximum & Minimum Prices
Limitations of Maximum & Minimum Prices
Alternatives to Maximum & Minimum Prices
Valuation of goodwill
This document discusses various methods for valuing goodwill, including the years' purchase of average profit method, years' purchase of weighted average method, capitalization method, super profit method, and annuity method. It provides examples and calculations to demonstrate how each method is applied in practice. The key information is that goodwill valuation is important for sole proprietorships, partnerships, and companies in various scenarios like sales, mergers, and changes in ownership or profit sharing. Multiple accepted approaches exist to determine the monetary value of goodwill for accounting purposes.
Forms of business organization
The document discusses different forms of business organizations in India. It describes sole proprietorship, joint hindu family business, partnerships (limited and general), cooperative societies, and joint stock companies. For each type of business, it covers defining characteristics, merits, and demerits. It provides details on the key aspects of setting up and running each organizational structure.
cardinal and ordinal utility analysis.
This document discusses cardinal and ordinal utility analysis. It provides details on:
- Cardinal utility which holds that utility can be measured in units, while ordinal utility holds that utility can only be compared between options.
- The law of diminishing marginal utility which states that as consumption of a good increases, the marginal utility from each additional unit decreases.
- Total utility, marginal utility, and the relationship between the two. Total utility increases at a diminishing rate while marginal utility decreases.
- The law of equi-marginal utility which explains how a consumer allocates a limited budget across goods to maximize utility by equating marginal utility across goods. Indifference curves and indifference schedules are used to illustrate this
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What is the difference between common stock and preferred stock? And Financia...
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Factors affecting the value of goodwill
- 9. on admission of a partner on retirement of a partner on death of a partner change in profit sharing ratio amalgamation of two or more firm dissolution
- 10. THANK YOU