Question

A and B are partners sharing profits in the ratio of 4 : 3. C is admitted into the partnership and the new ratio is determined at 3 : 2 : 1. C does not pay anything for his share of goodwill. On C’s admission firm’s goodwill was valued at ₹ 84,000. Pass journal entry.

Answer 1

Journal Entry
Date	Paticulars	L.F.	Debit (₹)	Credit (₹)
	C’s Capital A/c   ...Dr.		14,000
	To A’s Capital A/c			6,000
	To B’s Capital A/c			4,000
	(Being C’s share of goodwill adjusted by debiting his current account and crediting the sacrificing partners in their sacrificing ratio of 3 : 4)

Working Note:

Calculate the sacrificing ratio:

Sacrificing Ratio = Old Ratio − New Ratio

A’s Sacrifice = `4/7 - 3/6`

= `(4 xx 6)/(7 xx 6) - (3 xx 7)/(6 xx 7)`

= `24/42 - 21/42`

= `(24 - 21)/42`

= `3/42`

B’s Sacrifice = `3/7 - 2/6`

= `(3 xx 6)/(7 xx 6) - (2 xx 7)/(6 xx 7)`

= `18/42 - 14/42`

= `(18 - 14)/42`

= `4/42`

Sacrificing Ratio A and B = `3/42 : 4/42` or 3 : 4

Determine C’s share of goodwill and its distribution:

C’s share = 1/6

C’s share of Goodwill = `84,000 xx 1/6`

= 14,000

A’s share of goodwill = `14,000 xx 3/7`

= 6,000

B’s share of goodwill = `14,000 xx 4/7`

= 8,000