Question

A and B are partners sharing profits and losses in the ratio of 3 : 2. They admit C as partner in the firm for 1/4th share in profits which he takes 1/6th from A and 1/12th from B. C brings in only 60% of his share of firm's goodwill. Goodwill of the firm has been valued at ₹ 1,00,000. Pass necessary journal entries to record this arrangement.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Bank A/c	Dr.		15,000
	To Premium for Goodwill A/c				15,000
	(Goodwill brought in cash)
	Premium for Goodwill A/c	Dr.		15,000
	To A’s Capital A/c				10,000
	To B’s Capital A/c				5,000
	(Goodwill distributed between A & B in sacrificing ratio)
	C’s Capital A/c	Dr		10,000
	To A’s Capital A/c				6,667
	To B’s Capital A/c				3,333
	(Goodwill adjusted)

Working Notes:

WN1: Calculation of Sacrificing Ratio

$\begin{array}{l}\text{A's sacrifice =}\frac{1}{6}\times \frac{2}{2}=\frac{2}{12}\\ \text{B's sacrifice =}\frac{1}{12}\\ \therefore \text{\hspace{0.17em}Sacrificing Ratio between A and B = 2:1}\end{array}$

WN2: Calculation of share in goodwill of new partner

$\begin{array}{l}\text{C's share in goodwill}=\text{1,00,000}\times \frac{1}{4}=\text{Rs 25,000}\\ \text{Goodwill brought in cash Rs 15,000}(25,000\times 60\%)\\ \text{Remaining goodwill of Rs 10,000 will be adjusted through C's Capital A/c}\end{array}$