A and B were partners in a firm sharing profits and losses in the ratio of 3 : 2. They admitted C as a new partner for 3/7th share in the profit and the new profit-sharing ratio will be 2 : 2 : 3. C brought ₹ 2,00,000 as his capital and ₹ 1,50,000 as premium for goodwill. Half of their share of premium was withdrawn by A and B from the firm. Calculate sacrificing ratio and pass necessary Journal entries for the above transactions in the books of the firm.

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Solution

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

Cash A/c

Dr.

3,50,000

To C’s Capital A/c

2,00,000

To Premium for Goodwill A/c

1,50,000

(C brought capital and Premium for Goodwill)

Premium for Goodwill A/c

Dr.

1,50,000

To A’s Capital A/c

1,10,000

To B’s Capital A/c

40,000

(Premium for Goodwill distributed)

A’s Capital A/c

Dr.

55,000

B’s Capital A/c

Dr.

20,000

To Cash A/c

75,000

(Half of the goodwill withdrawn by A and B)

Calculation of Sacrificing Ratio

Working Notes-

WN1

Distribution of Premium for Goodwill

WN2

Amount of Premium for Goodwill withdrawn

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Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		3,50,000
	To C’s Capital A/c				2,00,000
	To Premium for Goodwill A/c				1,50,000
	(C brought capital and Premium for Goodwill)

	Premium for Goodwill A/c	Dr.		1,50,000
	To A’s Capital A/c				1,10,000
	To B’s Capital A/c				40,000
	(Premium for Goodwill distributed)

	A’s Capital A/c	Dr.		55,000
	B’s Capital A/c	Dr.		20,000
	To Cash A/c				75,000
	(Half of the goodwill withdrawn by A and B)