Question

Rajesh and Mukesh are equal partners in a firm. They admit Hari into partnership and the new profit sharing ratio between Rajesh, Mukesh and Hari is 4 : 3 : 2. On Hari's admission, goodwill of the firm is valued at Rs. 36,000. Hari is unable to bring his share of goodwill premium in cash. Rajesh, Mukesh and Hari decided not to show goodwill in their balance sheet. Record necessary journal entries for the treatment of goodwill on Hari's admission.

Answer 1

$\text{Journal Entries}$
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Amt.(Cr)}& \text{Amt.(Cr)}\\ \text{(i)}& \text{Hari's Capital A/c}& Dr& & 8,000& \\ & \text{To Rajesh's Capital A/c}& & & & \text{2,000}\\ & \text{To Mukesh's A/c}& & & & \text{6,000}\\ & \text{(2/9 share of goodwill of new partner adjusted from his capital}& & & & \\ & \text{and distributed among old partners in sacrificing ratio)}& & & & \end{array}$

Working Note :

Goodwill of firm = 36,000

Hari's share of profit = $\frac{2}{9}$

Hari's share of goodwill = $36,000\times \frac{2}{9}=8,000$

Sacrificing ratio = Old ratio - New ratio

Rajesh = $\frac{1}{2}-\frac{4}{9}=\frac{9-8}{18}=\frac{1}{18}$

Mukesh = $\frac{1}{2}-\frac{3}{9}=\frac{9-6}{18}=\frac{3}{18}$

Sacrifice of Rajesh and Mukesh = 1 : 3