Question

Anu and Bhagwan were partners in a firm sharing profit in the ratio of $3:1$. Goodwill appeared in the books at $Rs.4,40,000$. Raja was admitted to the partnership. The new profit-sharing ratio among Anu, Bhagwan and Raja was $2:2:1$. Raja brought $Rs.1,00,000$ for his capital and necessary cash for his goodwill premium. The goodwill of the firm was valued at $Rs.2,50,000$.
Record necessary Journal entries in the books of the firm for the above transaction.

Answer 1

(i) Anu's Capital a/c... Dr. 330000

Bhagwan's Capital a/c.... Dr. 110000

To Goodwill a/c 440000

(Being goodwill written off)

(ii) Bank a/c.... Dr. 150000

To Raja's Capital a/c 100000

To Premium for Goodwill a/c 50000

(Being cash and premium for goodwill brought in by Raja)

(iii) Premium for goodwill a/c.... Dr. 50000

Bhagwan's Capital a/c.... Dr. 37500

To Anu's Capital a/c 87500

(Being premium for goodwill and Bhagwan's gain transferred to Anu)

Working Note:

Calculation of sacrificing ratio:

Anu's sacrifice= 3/4- 2/5= 7/20

Bhagwan's gain= 1/4- 2/5= -3/20

Total goodwill of the firm= 250000

Bhagwan's share= 3/20* 250000

= 37500