Question

X and Y are partners sharing profits in the ratio of 4 : 3. Z joins partnership for `2/7`th share in the profits (of which he acquires `3/4`th from X and `1/4`th from Y). Z brings in ₹ 3,00,000 for his capital and ₹ 1,20,000 for goodwill. Half of the amount of goodwill is withdrawn by the old partners.

Pass necessary Journal entries and find out new profit sharing ratio.

Answer 1

Journal Entries
Date	Prticulars	L.F.	Debit (₹)	Credit (₹)
	Bank A/c   ...Dr.		4,20,000
	To Z’s Capital A/c			3,00,000
	To Premium for Goodwill A/c			1,20,000
	(Being cash brought in by Z for capital and goodwill)
	Premium for Goodwill A/c   ...Dr.		1,20,000
	To X’s Capital A/c			90,000
	To Y’s Capital A/c			30,000
	(Premium for goodwill transferred to old partners in sacrificing ratio i. e., 3 : 1)
	X’s Capital A/c   ...Dr.		45,000
	Y’s Capital A/c   ...Dr.		15,000
	To Bank A/c			60,000
	(Half of the goodwill/premium withdrawn by old partners in cash)

Calculate the new profit sharing ratio:

Z takes his share from X = `3/4 xx 2/7`

= `6/28`

Z takes his share from Y = `1/4 xx 2/7`

= `2/28`

Therefore, X’s new share = `4/7 - 6/28`

= `(4 xx 4)/(7 xx 4) - 6/28`

= `16/28 - 6/28`

= `(16 - 6)/28`

= `10/28`

= `5/14`

Y’s new share = `3/7 - 2/28`

= `(3 xx 4)/(7 xx 4) - 2/28`

= `12/28 - 2/28`

= `(12 - 2)/28`

= `10/28`

= `5/14`

Z’s new share = `2/7`

= `(2 xx 4)/(7 xx 4)`

= `8/28`

= `4/14`

New profit sharing ratio X, Y, and Z = `5/14 : 5/14 : 4/14` or 5 : 5 : 4