Question

Anu and Bhagwan were partners in a firm sharing profits in the ratio of 3 : 1. Goodwill appeared in the books at ₹ 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 ₹ 1,00,000 for his capital and necessary cash for his goodwill premium. Goodwill of the firm was valued at ₹ 2,50,000.
Record necessary Journal entries in the books of the firm for the above transactions.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Anu’s Capital A/c	Dr.		3,30,000
	Bhagwan’s Capital A/c	Dr.		1,10,000
	To Goodwill A/c				4,40,000
	(Old goodwill written off in old ratio)
	Cash A/c	Dr.		1,50,000
	To Raja’s Capital A/c				1,00,000
	To Premium for Goodwill A/c				50,000
	(Capital and goodwill brought in by Raju)
	Premium for Goodwill A/c	Dr.		50,000
	Bhagwan’s Capital A/c $\left(\frac{3}{20}\times 2,50,000\right)$	Dr.		37,500
	To Anu’s Capital A/c $\left(\frac{7}{20}\times 2,50,000\right)$				87,500
	(Premium for goodwill adjusted)

Working Notes:

WN1 Calculation of Share in Old Goodwill

$$\begin{gathered} \mathrm{Anu}\text{'}\mathrm{s}\mathrm{share}=4,40,000\times \frac{3}{4}=3,30,000 \\ \mathrm{Bhagwan}\text{'}\mathrm{s}\mathrm{share}=4,40,000\times \frac{1}{4}=1,10,000 \end{gathered}$$

WN2 Calculation of Raja's Share of Goodwill

$$\begin{gathered} \mathrm{Raja}\text{'}\mathrm{s}\mathrm{Share}\mathrm{of}\mathrm{Goodwill}=\mathrm{Firm}\text{'}\mathrm{s}\mathrm{Goodwill}\times \mathrm{Raja}\text{'}\mathrm{s}\mathrm{Profit}\mathrm{Share} \\ =2,50,000\times \frac{1}{5}=50,000 \end{gathered}$$

WN3 Calculation of Sacrificing Ratio

$$\begin{gathered} \mathrm{Sacrificing}\mathrm{Ratio}=\mathrm{Old}\mathrm{Share}-\mathrm{New}\mathrm{Share} \\ \mathrm{Anu}\text{'}\mathrm{s}=\frac{3}{4}-\frac{2}{5}=\frac{7}{20}\left(\mathrm{sacrifice}\right) \\ \mathrm{Bhagwan}\text{'}\mathrm{s}=\frac{1}{4}-\frac{2}{5}=-\frac{3}{20}\left(\mathrm{gain}\right) \end{gathered}$$