Goodwill Valuation & Change in PSR Among Partners | Testkart Guide

Goodwill Valuation & Change in Profit-Sharing Ratio Among Partners – Complete Testkart Guide

Master one of the most scoring and frequently tested topics in Class 12 Accountancy (CBSE, ISC & State Boards) and CA Foundation / CS Foundation with this comprehensive Testkart guide. From the meaning and nature of goodwill to the advanced treatment of change in Profit-Sharing Ratio (PSR) among existing partners, everything is covered in a structured, exam-ready format.

What's Covered

Part 1: Goodwill – Nature, Classification & Valuation

• Goodwill – Meaning & Concept: Definition, characteristics & nature explained with simple, real-life examples

• Why Value Goodwill? Key reasons for calculating goodwill, especially at the time of admission, retirement, death or change in PSR

• Factors Affecting the Value of Goodwill: Location, reputation, quality of products, customer relations, efficiency of management, market conditions & more

• Classification of Goodwill: Purchased Goodwill vs. Self-Generated Goodwill, with clear differences in tabular format

• Methods of Valuation of Goodwill: Simple Average Profit Method, Weighted Average Profit Method, Super Profit Method, Capitalisation of Average Profit Method & Capitalisation of Super Profit Method

• Comprehensive Differences: Average Profit Method vs. Super Profit Method, Simple vs. Weighted Average Profit Method, Capitalisation of Average Profit vs. Capitalisation of Super Profit Method

Part 2: Change in PSR Among Existing Partners

• Reasons for Change in PSR: Mutual agreement, change in profit-sharing arrangement, admission/retirement, etc.

• Adjustments Required on Change in PSR:

  • Determination of Sacrificing Ratio & Gaining Ratio

  • Accounting Treatment of Goodwill (when goodwill already appears in books and when it does not)

  • Accounting of Reserves, Accumulated Profits & Losses (General Reserve, Workmen Compensation Reserve, P&L Account, etc.)

  • Revaluation of Assets & Reassessment of Liabilities

  • Adjustment of Capital – when partners decide to re-adjust their capitals

• Format of Revaluation Account: Step-by-step layout with debit & credit treatment of assets and liabilities

• Complete Journal Entries: Accounting of goodwill, reserves, accumulated profits & losses, revaluation of assets, reassessment of liabilities and adjustment of capital

Who Is This For?

• Class 12 Commerce Students (CBSE, ISC & State Boards) preparing for board exams

• CA Foundation & CS Foundation Aspirants building a strong foundation in Partnership Accounts

• B.Com Students revising core concepts of Financial Accounting

• Teachers & Tutors looking for a ready-made teaching resource

• Anyone who wants a quick revision of Partnership Accounts – Goodwill & PSR Change before an exam

Key Highlights

• Exam-Oriented Approach: Focuses on the exact questions asked in board and competitive exams

• Concept Clarity First: Every method explained with logic, not just formulas

• All 5 Valuation Methods Covered: Simple Average, Weighted Average, Super Profit, Capitalisation of Average & Super Profit

• Sacrificing & Gaining Ratio Made Easy: Formulas with solved examples

• Revaluation Account Format & Journal Entries: Standard format that maximises marks in the exam

• Revision-Friendly Format: Bullet points, bold keywords, tables & difference charts for last-minute preparation

• Aligned with Latest Syllabus: Matches CBSE/ISC and CA Foundation curriculum requirements

Make goodwill, sacrificing ratio, gaining ratio and revaluation accounts your strongest topics – with Testkart's concise and exam-focused study material. Perfect for revision, self-study, and score-boosting practice!