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Basic Formulae

Give Journal ...

Question

Give Journal entries to record the following arrangements in the books of the firm:
(a) B and C are partners sharing profits in the ratio of 3 : 2. D is admitted paying a premium (goodwill) of ₹ 2,000 for 1/4th share of the profits, shares shares of B and C remain as before.
(b) B and C are partners sharing profits in the ratio of 3 : 2. D is admitted paying a premium of ₹ 2,100 for 1/4th share of profits which he acquires 1/6th from B and 1/12th from C.

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Solution

(a)

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

Cash A/c

Dr.

2,000

To Premium for Goodwill A/c

2,000

(D brought Premium for Goodwill)

Premium for Goodwill A/c

Dr.

2,000

To B’s Capital A/c

1,200

To C’s Capital A/c

800

(Premium for Goodwill distributed

between B and C in sacrificing ratio i.e. 3:2)

Working Note:
Distribution of premium for Goodwill-

(b)

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

Cash A/c

Dr.

2,100

To Premium for Goodwill A/c

2,100

(D brought his share of goodwill in cash)

Premium for Goodwill A/c

Dr.

2,100

To B’s Capital A/c

1,400

To C’s Capital A/c

700

(Premium for Goodwill brought distributed

between B and C in sacrificing Ratio i.e. 2:1)

Working Note:
WN1

WN2

Distribution of Premium for Goodwill-

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Similar questions

Q. Give Journal entries to record the following arrangements in the books of the firm:
(a)

B

and

C

are partners sharing profits in the ratio of

3 : 2

D

is admitted paying a premium (goodwill) of

R s . 2, 000

for

1 / 4^{t h}

share of the profits, shares of

B

and

C

remain as before.
(b)

B

and

C

are partners sharing profits in the ratio of

3 : 2

D

is admitted paying a premium of

R s . 2, 100

for

1 / 4^{t h}

share of profits which he acquires

1 / 6^{t h}

from

B

and

1 / 12^{t h}

from

C

Q. A and B are partners sharing profits in the ratio of

3 : 2

. C is admitted paying a premium with

1 / 4

th share of profit of which he acquires

1 / 6

th from A and

1 / 12

th from B. The goodwill of the firm is valued at

R s .20, 160

. One half of goodwill is withdrawn by the partners. A and B withdrew _________.

Q. Find New Profit-sharing Ratio:
(i) R and T are partners in a firm sharing profits in the ratio of 3 : 2. S joins the firm. R surrenders 1/4th of his share and T 1/5th of his share in favour of S.
(ii) A and B are partners. They admit C for 1/4th share. In future, the ratio between A and B would be 2 : 1.
(iii) A and B are partners sharing profits and losses in the ratio of 3 : 2. They admit C for 1/5th share in the profit. C acquires 1/5th of his share from A and 4/5th share from B.
(iv) X, Y and Z are partners in the ratio of 3 : 2 : 1. W joins the firm as a new partner for 1/6th share in profits. Z would retain his original share.
(v) A and B are equal partners. They admit C and D as partners with 1/5th and 1/6th share respectively.
(vi) A and B are partners sharing profits/losses in the ratio of 3 : 2 . C is admitted for 1/4th share. A and B decide to share equally in future.

Q. A and B are partners sharing profits in the ratio of 3 : 2. Their books show goodwill at ₹ 2,000. C is admitted as partner for 1/4th share of profits and brings in ₹ 10,000 as his capital but is not able to bring in cash for his share of goodwill ₹ 3,000. Draft Journal entries.

A and B are partners sharing profits in the ratio of 3:2. They admit C into the firm for $\frac{1}{4} t h$ share in profit which he takes $\frac{1}{6} t h$ from A and $\frac{1}{12} t h$ from B. C brings Rs 50,000 as goodwill . No goodwill account appears in the books of the firm. Pass necessary journal entries to record this arrangement.

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Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		2,000
	To Premium for Goodwill A/c				2,000
	(D brought Premium for Goodwill)

	Premium for Goodwill A/c	Dr.		2,000
	To B’s Capital A/c				1,200
	To C’s Capital A/c				800
	(Premium for Goodwill distributed between B and C in sacrificing ratio i.e. 3:2)