Question

Give Journal entries to record the following arrangements in the books of the firm:

1. B and C are partners sharing profits in the ratio of 3 : 2. D is admitted paying a premium (goodwill) of ₹ 2,000 for 1/4th share of the profits, shares shares of B and C remain as before.
2. B and C are partners sharing profits in the ratio of 3 : 2. D is admitted paying a premium of ₹ 2,100 for 1/4th share of profits which he acquires 1/6th from B and 1/12th from C.

Answer 1

(a)

Journal
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	Cash A/c         ...Dr.		2,000	-
	To Premium for Goodwill A/c		-	2,000
	(Being D brought Premium for Goodwill)
	Premium for Goodwill A/c        ...Dr.		2,000	-
	To B’s Capital A/c		-	1,200
	To C’s Capital A/c		-	800
	(Being Premium for Goodwill distributed between B and C in sacrificing ratio i.e. 3:2)

Working Note:

Distribution of premium for Goodwill:

B will get = `2,000xx 3/5` = ₹ 2,100

C will get = `2,000 xx2/5` = ₹ 800

(b)

Journal
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	Cash A/c         ...Dr.		2,100	-
	To Premium for Goodwill A/c		-	2,100
	(Being D brought his share of goodwill in cash)
	Premium for Goodwill A/c        ...Dr.		2,100	-
	To B’s Capital A/c		-	1,400
	To C’s Capital A/c		-	700
	(Being Premium for Goodwill distributed between B and C in sacrificing ratio i.e. 2:1)

Working Note:

1. Sacrificing Ratio = B : C

= `1/6 : 1/12`

= 2 : 1

2. Distribution of Premium for Goodwill:

B will get = `2,100 xx 2/3` = ₹ 1,400

C will get = `2,100 xx1/3` = ₹ 700