Aditya and Balan are partners sharing profits and losses in 3:2 ratio. They admitted Christopher for 1/4 share in the profits. The new profit sharing ratio agreed was 2:1:1. Christopher brought Rs. 50,000 for his capital. His share of goodwill was agreed to at Rs. 15,000. Christopher could bring only Rs. 10,000 out of his share of goodwill. Record necessary journal entries in the books of the firm?

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Solution

Journal Entries

Date

Particulars

L.F.

Debit Amount Rs

Credit Amount Rs

Cash A/c

Dr.

60,000

To Christopher's Capital A/c

50,000

To Premium for Goodwill A/c

10,000

(Amount of Capital and Premium for Goodwill brought by

Christopher)

Premium for Goodwill A/c

Dr.

10,000

Christopher's Capital A/c

Dr.

5,000

To Adiya's Capital A/c

6,000

To Balam's Capital A/c

9,000

(Goodwill Christopher's Share taken by Old Partner's in

Sacrificing Ratio)

Sacrificing Ratio = Old Ratio − New Ratio

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Journal Entries
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Cash A/c	Dr.		60,000
	To Christopher's Capital A/c				50,000
	To Premium for Goodwill A/c				10,000
	(Amount of Capital and Premium for Goodwill brought by Christopher)

	Premium for Goodwill A/c	Dr.		10,000
	Christopher's Capital A/c	Dr.		5,000
	To Adiya's Capital A/c				6,000
	To Balam's Capital A/c				9,000
	(Goodwill Christopher's Share taken by Old Partner's in Sacrificing Ratio)