Question

A and B are in partnership sharing profits and losses in the ratio of 5 : 3. C is admitted as a partner who pays ₹ 40,000 as capital and the necessary amount of goodwill which is valued at ₹ 60,000 for the firm. His share of profits will be 1/5th which he takes 1/10th from A and 1/10th from B.
Give Journal entries and also calculate future profit-sharing ratio of the partners.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Cash A/c	Dr.		52,000
	To C’s Capital A/c				40,000
	To Premium for Goodwill A/c				12,000
	(C brought Capital and his share of goodwill in cash)
	Premium for Goodwill A/c	Dr.		12,000
	To A’s Capital A/c				6,000
	To B’s Capital A/c				6,000
	(C’s share of Goodwill distributed in A and B)

Working Notes-

WN1

WN2

Calculation of new profit sharing Ratio

WN3

Distribution of C’s share of Goodwill (in Sacrificing Ratio)