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Question

# A and B are partners in a firm sharing profits and losses in the ratio of 3:2. A new partner C is admitted. A surrender 1/5th of his share and B surrender 2/5th of his share in favour of C. For the purpose of C′s admission, goodwill of the firm is valued at Rs.75,000 and C brought in his share of goodwill in cash which is retained in the firm's books. Journalise the above transactions.

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Solution

## JOURNAL1. Cash a/c..... Dr. 21000 To Premium for goodwill a/c 21000(Being Premium for goodwill brought in by C)2. Premium for goodwill a/c.... Dr. 21000 To A's Capital a/c 9000 To B's Capital a/c 12000(Being premium for goodwill brought in by C, distributed among the partners in the ratio 3:4)Working Note:A's old share= 3/5B's old share= 2/5C is admitted as a new partner. A's sacrifice= 3/5 * 1/5 = 3/25B's sacrifice= 2/5 * 2/5 = 4/25Sacrificing ratio= 3:4C's share= 3/25 + 4/25 = 7/25Hence, C's share of goodwill= 7/25 * 75000 = 21000

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