Question

A and B are partners sharing profits and losses in the ratio of 5 : 4. C is admitted for `1/5`th share. A and B decide to share equally in the future. Goodwill of the firm is valued at ₹ 4,50,000. C brings one-third share of his goodwill in Cash. Journal Entry for distribution of premium for goodwill will be:

विकल्प

• Date	Particulars	L.F.	Dr. Amount (₹)	Cr. Amount (₹)
  	C’s Current A/c   ...Dr.		90,000
  	To A’s Capital A/c			70,000
  	To B’s Capital A/c			20,000

• Date	Particulars	L.F.	Dr. Amount (₹)	Cr. Amount (₹)
  	Premium for Goodwill A/c   ...Dr.		60,000
  	C’s Current A/c   ...Dr.		30,000
  	To A’s Capital A/c			70,000
  	To B’s Capital A/c			20,000

• Date	Particulars	L.F.	Dr. Amount (₹)	Cr. Amount (₹)
  	Premium for Goodwill A/c   ...Dr.		30,000
  	C’s Current A/c   ...Dr.		60,000
  	To A’s Capital A/c			45,000
  	To B’s Capital A/c			45,000

• Date	Particulars	L.F.	Dr. Amount (₹)	Cr. Amount (₹)
  	Premium for Goodwill A/c   ...Dr.		30,000
  	C’s Current A/c   ...Dr.		60,000
  	To A’s Capital A/c			70,000
  	To B’s Capital A/c			20,000

Answer 1

Date	Particulars	L.F.	Dr. Amount (₹)	Cr. Amount (₹)
	Premium for Goodwill A/c   ...Dr.		30,000
	C’s Current A/c   ...Dr.		60,000
	To A’s Capital A/c			70,000
	To B’s Capital A/c			20,000

Explanation:

C’s share = `1/5`

Remaining Share = `1 - 1/5`

= `4/5`

A’s share = `1/2 xx 4/5`

= `4/10`

= `2/5`

B’s share = `1/2 xx 4/5`

= `4/10`

`2/5`

C’s share = `1/5`

= `(1 xx 2)/(5 xx 2)`

= `2/10`

`1/5`

New Share of A, B, and C = `2/5 : 2/5 : 1/5` or 2 : 2 : 1

Sacnfice by A = `5/9 - 2/5`

= `(5 xx 5)/(9 xx 5) - (2 xx 9)/(5 xx 9)`

= `25/45 - 18/45`

= `7/45`

Sacnfice by B = `4/9 - 2/5`

= `(4 xx 5)/(9 xx 5) - (2 xx 9)/(5 xx 9)`

= `20/45 - 18/45`

= `2/45`

Sacrifice Ratio of A and B = `7/45 : 2/45` or 7 : 2

Firm’s Goodwill = 4,50,000;

C’s Shares = `4,50,000 xx 1/5`

= ₹ 90,000

A’s share of Goodwill = `90,000 xx 7/9`

= ₹ 70,000

B’s share of Goodwill = `90,000 xx 2/9`

= ₹ 20,000