Question

A, B and C are partners, sharing profits in the ratio of 4 : 3 : 2. D is admitted for $\frac{2}{9}$ share of profits and brings Rs 3.00,000 as his capital and Rs 1,00,000 for his share of goodwill. The new profit sharing ratio will be A : B : C : D. 3 : 2 : 2 : 2.

Journalise the above arrangement in the books.

Answer 1

JOURNAL

$\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{L.F}& \text{Dr.(Rs)}& \text{Cr.(Rs)}\\ & \text{Bank A/c}Dr.& & 4,00,000& \\ & \text{To D's Capital A/c}& & & 4,00,000\\ & \text{(The amount of capital and goodwill/premium}& & & \\ & \text{brought in cash)}& & & \\ & \underset{–}{}& & & \\ & \text{D's Capital A/c}Dr.& & 1,00,000& \\ & \text{To A's Capital A/c}& & & 50,000\\ & \text{To B's Capital A/c}& & & 50,000\\ & \text{(The amount of goodwill/premium transferred to old}& & & \\ & \text{partners in sacrificing ratio i.e., 1 : 1)}& & & \end{array}$

Working Note:

Calculation of Sacrificing Ratio:

Sacrificing Ratio =Old Ratio - New Ratio

Thus, A's Sacrifice Ratio $=\frac{4}{9}-\frac{3}{9}=\frac{1}{9}$

B's Sacrifice Ratio $=\frac{3}{9}-\frac{2}{9}=\frac{1}{9}$

C's Sacrifice Ratio $=\frac{2}{9}-\frac{2}{9}=0$

As C has not made any sacrifice, therefore he will not be entitled to any amount of goodwill brought in by the new partner.

A and B have sacrificed in equal proportion, therefore they will get equal share in the goodwill brought in by D.