Question

A and B are partners, sharing profit and losses in the ratio of 3 : 2. Goodwill exists in their Balance Sheet at ₹ 24,000, when C is admitted into partnership for `1/5`th share in profit. He pays ₹ 50,000 for capital and ₹ 8,000 as goodwill. The ratio of the partners A, B and C in the new firm would be 2 : 2 : 1.

Pass journal entries in the books of the new firm to record above adjustments.

Answer 1

Journal Entries
Date	Paticulars	L.F.	Debit (₹)	Credit (₹)
	Bank A/c   ...Dr.		58,000
	To C’s Capital A/c			50,000
	To Premium for Goodwill A/c			8,000
	(Being capital brought in by C)
	A’s Capital A/c   ...Dr.		14,400
	B’s Capital A/c   ...Dr.		9,600
	To Goodwill A/c			24,000
	(Goodwill already existing in the books, now written off in old ratio)
	Premium for Goodwill A/c   ...Dr.		8,000
	To A’s Capital A/c			8,000
	(Amount of goodwill/premium transferred to A’s Capital)

Working Note:

Calculation of Sacrificing Ratio:

Sacrificing Ratio = Old Ratio − New Ratio

A = `3/5 - 2/5`

= `1/5`

B = `2/5 - 2/5`

= 0