Question

Verma and Sharma are partners in a firm sharing profits and losses in the ratio of 5 : 3. They admitted Ghosh as a new partner for 1/5 share of profits. Ghosh is to bring in Rs 20,000 as capital and Rs 4,000 as his share of goodwill premium. Give the necessary Journal entries :

(a) When the amount of goodwill is retained in the business.

(b) When the amount of goodwill is fully withdrawn.

(c) When 50% of the amount of goodwill is withdrawn.

(d) When goodwill is paid privately.

Answer 1

JOURNAL
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Debit}& \text{Credit}\\ & & & & \text{(Rs)}& \text{(Rs)}\\ & \text{Bank A/c}& \text{Dr.}& & 24,000& \\ & \text{To Ghosh's Capital A/c}& & & & 20,000\\ & \text{To Premium for Goodwill A/c}& & & & 4,000\\ & \underset{–}{\left(\text{Being capital and goodwill brought in cash}\right)}& & & & \\ \text{A}& \text{Premium for Goodwill A/c}& \text{Dr.}& & 4,000& \\ & \text{To Verma's Capital A/c}& & & & 2,500\\ & \text{To Sharma's Capital A/c}& & & & 1,500\\ & \underset{–}{\text{(Being goodwill distributed among sacrificing partners)}}& & & & \\ \text{B}& \text{Verma's Capital A/c}& \text{Dr.}& & 2,500& \\ & \text{Sharma's Capital A/c}& \text{Dr.}& & 1,500& \\ & \text{To Bank A/c}& & & & 4,000\\ & \underset{–}{\text{(Being goodwill is fully withdrawn)}}& & & & \\ \text{C}& \text{Verma's Capital A/c}& \text{Dr.}& & 1,250& \\ & \text{Sharma's Capital A/c}& \text{Dr.}& & 750& \\ & \text{To Bank A/c}& & & & 2,000\\ & \underset{–}{\text{(Being}50\%\text{of the goodwill withdrawn)}}& & & & \\ \text{D}& \text{No entry}& & & & \end{array}$

Sacrificing Ratio is 5 : 3