Question

Arti and Bharti are partners in a firm sharing profits in 3 : 2 ratio. They admitted Sarthi for $\frac{1}{4}$ share in the profits of the firm. Sarthi brings Rs.50,000 for his capital and Rs. 10,000 for his 1/4 share of goodwill. Goodwill already appears in the books of Arti and Bharti at Rs.5,000. The new profit sharing ratio between Arti, Bharti and Sarthi will be 2 : 1: 1. Record the necessary journal entries in the books of the new firm.

Answer 1

Existing goodwill is to be written off among old partners in old profit sharing ratio.

$\text{Journal Entries}$
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Amt.(Cr)}& \text{Amt.(Cr)}\\ \text{(i)}& \text{Arti's A/c}& Dr& & 3,000& \\ & \text{Bharti's A/c}& Dr& & 2,000& \\ & \text{To Goodwill A/c}& & & & \text{5,000}\\ & \text{(Goodwill written off among old partners in old ratio )}& & & & \\ & \underset{–}{}& & & & \\ \text{(ii)}& \text{Cash A/c}& Dr& & 60,000& \\ & \text{To Sarthi's Capital A/c}& & & & \text{60,000}\\ & \text{(Capital Rs. 50,000 and premium Rs.10,000 paid by Sarthi's in cash )}& & & & \\ & \underset{–}{}& & & & \\ \text{(iii)}& \text{Sarthi's Capital A/c}& Dr& & 10,000& \\ & \text{To Arti's A/c}& & & & \text{4,000}\\ & \text{To Bharti's A/c}& & & & \text{6,000}\\ & \text{(Premium distributed among old partners in sacrificing ratio)}& & & & \end{array}$