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Question -

A and B are partners in a firm sharing profits and losses in the ratio of 3:2. They decide to admit C into partnership with 1/4 share in profits. C will bring in ₹. 30,000 for capital and the requisite amount of goodwill premium in cash. The goodwill of the firm is valued at ₹, 20,000. The new profit sharing ratio is 2:1:1. A and B withdraw their share of goodwill. Give necessary journal entries?



Answer -


Journal Entries

Date

Particulars

L.F.

Debit Amount ₹

Credit Amount ₹

 

 

 

 

 

 

Cash A/c

Dr.

 

35,000

 

 

To C’s Capital A/c

 

30,000

 

To Premium for Goodwill A/c

 

5,000

 

(Amount of Capital and Share of Goodwill brought by C)

 

 

 

 

 

 

 

Premium for Goodwill A/c

Dr.

 

5,000

 

 

To A’s Capital A/c

 

2,000

 

To B’s Capital A/c

 

3,000

 

(C’s Share of Goodwill credited to A and B in 2:3,

Sacrificing Ratio)

 

 

 

 

 

 

 

A’s Capital A/c

Dr.

 

2,000

 

 

B’s Capital A/c

Dr.

 

3,000

 

 

To Cash A/c

 

5,000

 

(Share of Goodwill withdrawn by Old  Partners)

 

 

 

 

 

 

 

 

 
 Sacrificing Ratio = Old Ratio − New Ratio


Goodwill of the firm = Rs 20,000
C’s share of Goodwill = 

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