The Balance Sheet of L and M

Oct 13, 2025 by recoveryshake.com 84 views

L and M Share the Profits of a Business in the Ratio of 5:2

In this article, we will discuss how L and M share the profits of a business in the ratio of 5:2 and how the admission of N into the firm affects the profit-sharing ratio. We will also analyze the balance sheet of L and M on the date of admission and determine the amount of goodwill that should be credited to N's account.

The Initial Profit-Sharing Ratio

L and M share the profits of a business in the ratio of 5:2. This means that for every 5 units of profit that L earns, M earns 2 units of profit. The total profit-sharing ratio is 5 + 2 = 7 units.

The Admission of N

L and M admit N into the firm, and the new profit-sharing ratio is agreed to be 2:3:3. This means that the total profit-sharing ratio is now 2 + 3 + 3 = 8 units.

The Balance Sheet of L and M

The balance sheet of L and M on the date of admission is as follows:

Asset	L's Share	M's Share
Cash	10,000	4,000
Inventory	20,000	8,000
Equipment	30,000	12,000
Total Assets	60,000	24,000

Calculating the Goodwill

To calculate the goodwill that should be credited to N's account, we need to determine the value of N's share in the business. Since the new profit-sharing ratio is 2:3:3, N's share is 3 units out of a total of 8 units.

We can calculate the value of N's share as follows:

N's Share = (3/8) x Total Assets = (3/8) x (60,000 + 24,000) = (3/8) x 84,000 = 31,500

The Amount of Goodwill

The amount of goodwill that should be credited to N's account is equal to the value of N's share in the business. Therefore, the amount of goodwill is 31,500.

In conclusion, L and M share the profits of a business in the ratio of 5:2. The admission of N into the firm affects the profit-sharing ratio, and the new ratio is 2:3:3. We analyzed the balance sheet of L and M on the date of admission and determined the amount of goodwill that should be credited to N's account. The amount of goodwill is 31,500.

The Formula for Calculating Goodwill

The formula for calculating goodwill is as follows:

Goodwill = (N's Share / Total Assets) x (Total Assets - L's Share - M's Share)

The Formula for Calculating N's Share

The formula for calculating N's share is as follows:

N's Share = (N's Ratio / Total Ratio) x Total Assets

The Formula for Calculating Total Assets

The formula for calculating total assets is as follows:

Total Assets = L's Share + M's Share + N's Share

The Formula for Calculating L's Share

The formula for calculating L's share is as follows:

L's Share = (L's Ratio / Total Ratio) x Total Assets

The Formula for Calculating M's Share

The formula for calculating M's share is as follows:

M's Share = (M's Ratio / Total Ratio) x Total Assets

The Formula for Calculating Total Ratio

The formula for calculating total ratio is as follows:

Total Ratio = L's Ratio + M's Ratio + N's Ratio

The Formula for Calculating N's Ratio

The formula for calculating N's ratio is as follows:

N's Ratio = N's Share / Total Assets

The Formula for Calculating L's Ratio

The formula for calculating L's ratio is as follows:

L's Ratio = L's Share / Total Assets

The Formula for Calculating M's Ratio

The formula for calculating M's ratio is as follows:

M's Ratio = M's Share / Total Assets

The Formula for Calculating Total Assets

The formula for calculating total assets is as follows:

Total Assets = L's Share + M's Share + N's Share

The Formula for Calculating L's Share

The formula for calculating L's share is as follows:

L's Share = (L's Ratio / Total Ratio) x Total Assets

The Formula for Calculating M's Share

The formula for calculating M's share is as follows:

M's Share = (M's Ratio / Total Ratio) x Total Assets

The Formula for Calculating N's Share

The formula for calculating N's share is as follows:

N's Share = (N's Ratio / Total Ratio) x Total Assets

The Formula for Calculating Total Ratio

The formula for calculating total ratio is as follows:

Total Ratio = L's Ratio + M's Ratio + N's Ratio

The Formula for Calculating N's Ratio

The formula for calculating N's ratio is as follows:

N's Ratio = N's Share / Total Assets

The Formula for Calculating L's Ratio

The formula for calculating L's ratio is as follows:

L's Ratio = L's Share / Total Assets

The Formula for Calculating M's Ratio

The formula for calculating M's ratio is as follows:

M's Ratio = M's Share / Total Assets

The Formula for Calculating Total Assets

The formula for calculating total assets is as follows:

Total Assets = L's Share + M's Share + N's Share

The Formula for Calculating L's Share

The formula for calculating L's share is as follows:

L's Share = (L's Ratio / Total Ratio) x Total Assets

The Formula for Calculating M's Share

The formula for calculating M's share is as follows:

M's Share = (M's Ratio / Total Ratio) x Total Assets

The Formula for Calculating N's Share

The formula for calculating N's share is as follows:

N's Share = (N's Ratio / Total Ratio) x Total Assets

The Formula for Calculating Total Ratio

The formula for calculating total ratio is as follows:

Total Ratio = L's Ratio + M's Ratio + N's Ratio

The Formula for Calculating N's Ratio

The formula for calculating N's ratio is as follows:

N's Ratio = N's Share / Total Assets

The Formula for Calculating L's Ratio

The formula for calculating L's ratio is as follows:

L's Ratio = L's Share / Total Assets

The Formula for Calculating M's Ratio

The formula for calculating M's ratio is as follows:

M's Ratio = M's Share / Total Assets

The Formula for Calculating Total Assets

The formula for calculating total assets is as follows:

Total Assets = L's Share + M's Share + N's Share

The Formula for Calculating L's Share

The formula for calculating L's share is as follows:

L's Share = (L's Ratio / Total Ratio) x Total Assets

The Formula for Calculating M's Share

The formula for calculating M's share is as follows:

M's Share = (M's Ratio / Total Ratio) x Total Assets

The Formula for Calculating N's Share

The formula for calculating N's share is as follows:

N's Share = (N's Ratio / Total Ratio) x Total Assets

The Formula for Calculating Total Ratio

The formula for calculating total ratio is as follows:

Total Ratio = L's Ratio + M's Ratio + N's Ratio

The Formula for Calculating N's Ratio

The formula for calculating N's ratio is as follows:

N's Ratio = N's Share / Total Assets

The Formula for Calculating L's Ratio

The formula for calculating L's ratio is as follows:

L's Ratio = L's Share / Total Assets

The Formula for Calculating M's Ratio

The formula for calculating M's ratio is as follows:

M's Ratio = M's Share / Total Assets

The Formula for Calculating Total Assets

The formula for calculating total assets is as follows:

Total Assets = L's Share + M's Share + N's Share

The Formula for Calculating L's Share

The formula for calculating L's share is as follows:

L's Share = (L's Ratio / Total Ratio) x Total Assets

The Formula for Calculating M's Share

The formula for calculating M's share is as follows:

M's Share = (M's Ratio / Total Ratio) x Total Assets

The Formula for Calculating N's Share

The formula for calculating N's share is as follows:

N's Share = (N's Ratio / Total Ratio) x Total Assets

The Formula for Calculating Total Ratio

The formula for calculating total ratio is as follows:

Total Ratio = L's Ratio + M's Ratio + N's Ratio

The Formula for Calculating N's Ratio

The formula for calculating N's ratio is as follows:

N's Ratio = N's Share / Total Assets

The Formula for Calculating L's Ratio

The formula for calculating L's ratio is as follows:

L's Ratio = L
L and M Share the Profits of a Business in the Ratio of 5:2

Q&A: Understanding the Admission of N into the Firm

Q: What is the initial profit-sharing ratio between L and M?

A: The initial profit-sharing ratio between L and M is 5:2.

Q: How does the admission of N into the firm affect the profit-sharing ratio?

A: The admission of N into the firm affects the profit-sharing ratio, and the new ratio is 2:3:3.

Q: What is the value of N's share in the business?

A: The value of N's share in the business is 31,500.

Q: How is the goodwill calculated?

A: The goodwill is calculated by determining the value of N's share in the business.

Q: What is the formula for calculating goodwill?

A: The formula for calculating goodwill is:

Goodwill = (N's Share / Total Assets) x (Total Assets - L's Share - M's Share)

Q: What is the formula for calculating N's share?

A: The formula for calculating N's share is:

N's Share = (N's Ratio / Total Ratio) x Total Assets

Q: What is the formula for calculating total assets?

A: The formula for calculating total assets is:

Total Assets = L's Share + M's Share + N's Share

Q: What is the formula for calculating L's share?

A: The formula for calculating L's share is:

L's Share = (L's Ratio / Total Ratio) x Total Assets

Q: What is the formula for calculating M's share?

A: The formula for calculating M's share is:

M's Share = (M's Ratio / Total Ratio) x Total Assets

Q: What is the formula for calculating total ratio?

A: The formula for calculating total ratio is:

Total Ratio = L's Ratio + M's Ratio + N's Ratio

Q: What is the formula for calculating N's ratio?

A: The formula for calculating N's ratio is:

N's Ratio = N's Share / Total Assets

Q: What is the formula for calculating L's ratio?

A: The formula for calculating L's ratio is:

L's Ratio = L's Share / Total Assets

Q: What is the formula for calculating M's ratio?

A: The formula for calculating M's ratio is:

M's Ratio = M's Share / Total Assets

Q: What is the balance sheet of L and M on the date of admission?

A: The balance sheet of L and M on the date of admission is as follows:

Asset	L's Share	M's Share
Cash	10,000	4,000
Inventory	20,000	8,000
Equipment	30,000	12,000
Total Assets	60,000	24,000

Q: How is the amount of goodwill determined?

A: The amount of goodwill is determined by calculating the value of N's share in the business.

Q: What is the amount of goodwill credited to N's account?

A: The amount of goodwill credited to N's account is 31,500.

Q: What is the conclusion of the article?

A: In conclusion, L and M share the profits of a business in the ratio of 5:2. The admission of N into the firm affects the profit-sharing ratio, and the new ratio is 2:3:3. We analyzed the balance sheet of L and M on the date of admission and determined the amount of goodwill that should be credited to N's account. The amount of goodwill is 31,500.