Question

Anju and Manju are partners, sharing profits and losses in the proportion of 7 : 5. They agreed to admit Meenu, their manager, into partnership, who is to get one sixth share in the business. Meenu brings in ₹ 2,00,000 for her capital and ₹ 96,000 for `1/6`th share of goodwill which she acquires `1/24`th from Anju and `1/8`th from Manju. The profit for the first year of the new partnership amount to ₹ 4,80,000.

Make the necessary Journal entries in connection with Meenu’s admission and divide the profit between the partners.

Answer 1

Journal Entries
Date	Prticulars	L.F.	Debit (₹)	Credit (₹)
	Bank A/c   ...Dr.		2,96,000
	To Meenu’s Capital A/c			2,00,000
	To Premium for Goodwill A/c			96,000
	(Being cash brought in by Meenu for capital and goodwill)
	Premium for Goodwill A/c   ...Dr.		96,000
	To Anju’s Capital A/c			24,000
	To Manju’s Capital A/c			72,000
	(Premium for goodwill transferred to old partners in sacrificing ratio i. e., 1 : 3)
	Profit and Loss Appropriation A/c   ...Dr.		4,80,000
	To Anju’s Capital A/c			2,60,000
	To Manju’s Capital A/c			1,40,000
	To Meenu’s Capital A/c			80,000
	(Being profit for the year distributed to partners in the new profit-sharing ratio)

Calculate the new profit-sharing ratio:

Sacrifice made by Anju = `1/24`

Sacrifice made by Manju = `1/8`

= `(1 xx 3)/(8 xx 3)`

= `3/24`

Anju’s new share = `7/12 - 1/24`
= `(7 xx 2)/(12 xx 2) - 1/24`

= `14/24 - 1/24`

= `(14 - 1)/24`

= `13/24`

Manju’s new share = `5/12 - 3/24`

= `(5 xx 2)/(12 xx 2) - 3/24`

= `10/24 - 3/24`

= `(10 - 3)/24`

= `7/24`

Meenu’s new share = `1/6`

= `(1 xx 4)/(6 xx 4)`

= `4/24`

New Profit-Sharing Ratio Anju, Manju, and Meenu = 13 : 7 : 4

Divide the profit of ₹ 4,80,000, 13 : 7 : 4

Anju’s Share = `4,80,000 xx 13/24`

= ₹ 2,60,000

Manju’s Share = `4,80,000 xx 7/24`

= ₹ 1,40,000

Meenu’s share = `4,80,000 xx 4/24`

₹ 80,000