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Question

Madan and Gopal are partners sharing profits in the ratio of 3 : 2. They admit Sooraj for 1/3rd share in profits on 1st April, 2019. They also decide to share future profits equally. Goodwill of the firm was valued at ₹ 5,50,000. Goodwill existed in the books of account at ₹ 1,00,000, which the partners decide to carry forward.
Sooraj is unable to bring his share of goodwill. Pass the necessary Journal entries on admission of Sooraj, if:
(a) Goodwill is not to be raised and written off; and
​(b) Goodwill is to be raised and written off.

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Solution

Particulars

Madan

Gopal

Old Ratio

3/5

2/5

New Ratio

1/3

1/3

Gain/Sacrifice

(3/5 – 1/3)= 4/15 (Sacrifice)

(2/5 – 1/3)= 1/15 (Sacrifice)

Sacrificing Ratio

4:1


Case a) Goodwill is not be raised and written off:

In the books of the Madan, Gopal and Sooraj

Journal

Date

Particulars

L.F.

Debit
Amount

(₹)

Credit
Amount

(₹)

2019

April 01

Sooraj’s Capital A/c (4,50,000 × 1/3)

Dr.

1,50,000

To Madan’s Capital A/c (1,50,000× 4/5)

1,20,000

To Gopal’s Capital A/c (1,50,000× 1/5)

30,000

(Being adjustment for goodwill not brought by the partner)


Case b) Goodwill is to be raised and written off:

In the books of the Madan, Gopal and Sooraj

Journal

Date

Particulars

L.F.

Debit Amount

(₹)

Credit Amount

(₹)

2019

Goodwill A/c

Dr.

4,50,000

April 01

To Madan’s Capital A/c (4,50,000 × 3/5)

2,70,000

To Gopal’s Capital A/c (4,50,000 × 2/5)

1,80,000

(Being goodwill raised in the books of accounts)

2019

April 01

Sooraj’s Capital A/c (4,50,000 × 1/3)

Dr.

1,50,000

Madan’s Capital A/c (4,50,000 × 1/3)

1,50,000

Gopal’s Capital A/c (4,50,000 × 1/3)

1,50,000

To Goodwill A/c

4,50,000

(Being adjustment for goodwill not brought by the partner)


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