Question

Varun and Barath are partners sharing profits and losses 5 : 4. They admit Dhamu into partnership. The new profit sharing ratio is agreed at 1 : 1 : 1. Dhamu’s share of goodwill is valued at ₹ 15,000 of which he pays ₹ 10,000 in cash. Pass necessary journal entries for adjustment of goodwill on the assumption that the fluctuating capital method is followed.

Answer 1

Dhamu’s share of goodwill against sacrificing ratio:

Sacrificing Ratio = Old share – New share

Varun = `5/9 - 1/3 = (5 - 3)/9 = 2/9`

Barath = `4/9 - 1/3 = (4 - 3)/9 = 1/9`

Goodwill value = `15000/3` = ₹ 5000

Date	Particulars	L.F.	Debit ₹	Credit ₹
	Cash A/c .......Dr. Dhamu's capital A/c ........Dr. To Varun's Capital A/c To Barath's Capital A/c (Share of goodwill of Dhamu's credited to old partners capital A/c)		10,000 5,000 - -	- - 10,000 5,000