Question

X and Y are partners in a firm sharing profits and losses in 4:3 ratio. They admitted Z for 1/8 share. Z brought Rs. 20,000 for his capital and Rs. 7,000 for his 1/8 share of goodwill. Subsequently X, Y and Z decided to show goodwill in their books at Rs. 40,000. Show necessary journal entries in the books of X, Y and Z?

Answer 1

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	Cash A/c        ...Dr.		27,000	-
	To Z’s Capital A/c		-	20,000
	To Premium for Goodwill A/c		-	7,000
	(Being Amount of Capital and his share of Goodwill brought by Z)
	Premium for Goodwill A/c      ...Dr.		7,000	-
	To X’s Capital A/c		-	4,000
	To Y’s Capital A/c		-	3,000
	(Being Premium for Goodwill credit to Old Partners in Sacrificing Ratio)