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Question

E and F were partners in a firm sharing profits in the ratio of 3 : 1. They admitted G as a new partner on 1st April, 2019 for 1/3rd share. It was decided that E, F and G will share future profits equally. G brought ₹ 50,000 in cash and machinery valued at ₹ 70,000 as premium for goodwill.
Pass necessary Journal entries in the books of the firm.

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Solution

Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

2019
April 1


Cash A/c


Dr.


50,000

Machinery A/c

Dr.

70,000

To Premium for Goodwill A/c

1,20,000

(G brought cash Rs 50,000 and Machinery
Rs 70,000 for his share of Goodwill)

April 1

Premium for Goodwill A/c

Dr.

1,20,000

To E’s Capital A/c

1,20,000

(G share of goodwill transferred to E’s Capital Account)

April 1

F’s Capital A/c

Dr.

30,000

To E’s Capital A/c

30,000

(F’s share of gain in goodwill charged from his capital and transferred to E’s capital)


Working Notes:

WN1

WN2

Calculation of F’s share of gain in goodwill

G’s share of Goodwill = 50,000 + 70,000 = Rs 1, 20,000

Goodwill of the firm on the basis of G’s share

F’s share of gain in goodwill


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