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 1/5th share of profits. Ghosh is to bring in ₹ 20,000 as capital and ₹ 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(b) When the amount of goodwill is fully withdrawn.
(c) When 50% of the amount of goodwill is withdrawn.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 Entries
S.No.	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
Case (a)
	Cash A/c	Dr.		24,000
	To Ghosh's Capital A/c				20,000
	To Premium for Goodwill A/c				4,000
	(Capital and Goodwill his share broughtby Ghosh)
	Premium for Godwill A/c	Dr.		4,000
	To Verma's Capital A/c				2,500
	To Sharma's Capital A/c				1,500
	(Goodwill brought by Ghosh credited to Old Partnersin Sacrificing ratio)
Case (b)	Cash A/c	Dr.		24,000
	To Ghosh Capital A/c				20,000
	To Premium for Goodwill A/c				4,000
	(Capital and Goodwill brought by Ghosh for (1/5)share of profit)
	Premium for Goodwill A/c	Dr.		4,000
	To Verma's Capital A/c				2,500
	To Sharma's Capital A/c				1,500
	(Goodwill brought by Ghosh credited in Old Partner in Sacrificing Ratio)
	Verma's Capital A/c	Dr.		2,500
	Sharma's Capital A/c	Dr.		1,500
	To Cash A/c				4,000
	(Amount of Premium for Goodwill withdrawn byOld Partners)
Case (c)	Cash A/c	Dr.		24,000
	To Ghosh's Capital A/c				20,000
	To Premium for Goodwill A/c				4,000
	(Capital and Goodwill brought by Ghosh for (1/5)share of profit)
	Premium for Goodwill A/c	Dr.		4,000
	To Verma's Capital A/c				2,500
	To Sharma's Capital A/c				1,500
	(Premium for Goodwill credited to Old Partner's Capital Account in sacrificing ratio)
	Verma's Capital A/c	Dr.		1,250
	Sharma's Capital A/c			750
	To Cash A/c				2,000
	(Half of the amount of premium for goodwill withdrawn by Old partners)
Case (d)	No entry: Goodwill was not brought into firm