Question

Amar and Samar were partners in a firm sharing profits and losses in 3 :1 ratio. They admitted Kanwar for $\frac{1}{4}$ share of profit. Kanwar could not bring his share of goodwill premium in cash. The goodwill of the firm was valued at Rs. 80,000 on Kanwar's admission. Record necessary journal entry for goodwill on Kanwar's admission.

Answer 1

$\text{Journal Entries}$\
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Amt.(Cr)}& \text{Amt.(Cr)}\\ \text{(i)}& \text{Kanwar's Capital A/c}& Dr& & 20,000& \\ & \text{To Amar's Capital A/c}& & & & \text{15,000}\\ & \text{To Samar's Capital A/c}& & & & \text{5,000}\\ & \text{(1/4 share of Kanwar not paid}& & & & \\ & \text{in cash adjusted from his capital and}& & & & \\ & \text{distributed in sacrificing ratio among}& & & & \\ & \text{old partners)}& & & & \end{array}$

Working Note : Goodwill of firm = 80,000

Kanwar's profit share ratio = $\frac{1}{4}$

Kanwar's sharing of goodwill = $=80,000\times \frac{1}{4}=20,000$

Note : Old ratio will be considered as sacrificing Ratio.