Question

Arun and Varun are partners sharing profits in the ratio of 3 : 2. Bhushan is admitted paying a premium of ₹ 84,000 for 1/4th share of profits which he acquires 1/6th from Arun and 1/12th from Varun. Calculate new ratios and pass entries.

Answer 1

1. Calculation of New Profit-Sharing Ratio

Old Profit-Sharing Ratio of Arun and Varun = 3 : 2

Arun's old share = `3/5`

Varun's old share = `2/5`

Given Sacrifices:

Bhushan acquires his `1/4` share by taking `1/6` from Arun and `1/12` from Varun.

Arun's sacrifice = `1/6`

Arun's sacrifice = `1/12`

New Shares:

Arun's new share = Old Share − Sacrifice = `3/5 - 1/6 = (18 - 5)/30 = 13/30`

Varun's new share = Old Share − Sacrifice = `2/5 - 1/12 = (24 - 5)/60 = 19/60`

To equate all denominators to 60:

Arun's new share = `(13 xx 2)/(30 xx 2) = 26/60`

Varun's new share = `19/60`

Bhushan's new share = `1/4 = (1 xx 15)/(4 xx 15)= 15/60`

New Profit-Sharing Ratio = 26 : 19 : 15

2. Calculation of Sacrificing Ratio

Premium for goodwill is distributed using the individual partners' sacrifices:

Arun's sacrifice : Varun's sacrifice = `1/6 : 1/12 = 2/12 : 1/12 = 2 : 1`

Goodwill Distribution:

Arun's share = `84,000 xx 2/3 = 56,000`

Varun's share = `84,000 xx 1/3 = 28,000`

3.

Journal Entries in the Books of the Firm
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank/Cash A/c   ...Dr.
	To Premium for Goodwill A/c		84,000
	(Being premium for goodwill brought in cash by Bhushan)			84,000
2.	Premium for Goodwill A/c   ...Dr.		84,000
	To Arun's Capital A/c			56,000
	To Varun's Capital A/c			28,000
	(Being premium for goodwill credited to old partners in their sacrificing ratio of 2 : 1)