Question

Anil and Sunil are partners in a firm with fixed capitals of $Rs.3,20,000$ and $Rs.2,40,000$ respectively. They admitted Charu as a new partner for $1/4^{th}$ share in the profits of the firm on $1^{st}$April,2012. Charu brought $Rs.3,20,000$ as her share of capital. Give the necessary journal entries on Charu's admission with regard to capital and goodwill.

Answer 1

JOURNAL

1. Cash a/c.... Dr. 320000

To Charu's Capital a/c 320000

(Being capital brought in by Charu)

2. Charu's Current a/c........ Dr. 100000

To Anil's Capital a/c 50000

To Sunil's Capital a/c 50000

(Being Charu's share of goodwill adjusted through the current accounts)

Working Note:

Calculation of Hidden Goodwill:

Total Capital of the firm after admission= 320000+240000+320000

= 880000

Total Capital of the firm based on Charu's capital= 320000 * 4/1

= 1280000

Therefore, Hidden Goodwill= 1280000- 880000

= 400000

Charu's share of goodwill= 400000 * 1/4= 100000