Question

(a) A and B are partners in a firm sharing profits in the ratio of 3 : 2. C is admitted as a partner. A and B surrender $\frac{1}{2}$ of their respective share in favour of C. Find the new profit sharing ratio and also the sacrificing ratio.

(b) C is to bring his share of premium for goodwill in cash. The goodwill of the firm is estimated at Rs 4,00,000. Pass necessary entries for the record of goodwill in the above case.

Answer 1

(a) A's existing share $=\frac{3}{5}$

Share surrendered by $A=\frac{1}{2}$ of $\frac{3}{5}=\frac{3}{10}$

B's existing share $=\frac{2}{5}$

Share surrendered by $B=\frac{1}{2}\text{of}\frac{2}{5}=\frac{2}{10}$

$\therefore$ Sacrificing Ratio $=A\frac{3}{10}:B\frac{2}{10}=3:2$

New Ratios : A's new share $=\frac{3}{5}-\frac{3}{10}=\frac{6-3}{10}=\frac{3}{10}$

B's new share $=\frac{2}{5}-\frac{2}{10}=\frac{4-2}{10}=\frac{2}{10}$

C's new share $=\frac{3}{10}+\frac{2}{10}=\frac{5}{10}$

Hence, new ratios of A,B and $C=\frac{3}{10}:\frac{2}{10}:\frac{5}{10}=3:2:5$

(b) C's share of Goodwill $=Rs4,00,000\times \frac{5}{10}=Rs2,00,000$

JOURNAL

$\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{L.F}& \text{Dr.(Rs)}& \text{Cr.(Rs)}\\ & \text{Bank A/c}Dr.& & 2,00,000& \\ & \text{To C's Capital A/c}& & & 2,00,000\\ & \text{(Premium for goodwill brought in cash)}& & & \\ & \underset{–}{}& & & \\ & \text{C's Capital A/c}Dr.& & 2,00,000& \\ & \text{To A's Capital A/c}& & & 1,20,000\\ & \text{To B's Capital A/c}& & & 80,000\\ & \text{(Premium brought in by C credited to A and B in the}& & & \\ & \text{sacrificing ratio of 3 : 2)}& & & \end{array}$