Question

$A$ and $B$ are partners sharing profits in the ratio of $3:2$. Their books show goodwill at $Rs.2,000$. $C$ is admitted with $1/4^{th}$ share of profits and brings in $Rs.10,000$ as his capital but is not able to bring in cash for his share of goodwill $Rs.3,000$. Draft Journal entries.

Answer 1

JOURNAL

1. A's Capital a/c.... Dr. 1200

B's Capital a/c.... Dr. 800

To Goodwill a/c 2000

(Being goodwill written off in the ratio of 3:2)

2. Cash a/c...... Dr. 10000

To C's Capital a/c 10000

(Being capital brought in by C)

3. C's Capital.... Dr. 3000

To A's Capital a/c 1800

To B's Capital a/c 1200

(Being C's share of goodwill charged to his capital account and distributed among the partners in the ratio of 3:2)