Question

Benu and Leena are partners in a firm sharing profits and losses in the ratio of 5 : 3. They admit Deepa and Erica as two new partners.
The new profit-sharing ratio is decided to be 3 : 2 : 2 : 3.
Both the new partners introduce ₹ 1,00,000 each as capital.
Deepa pays ₹ 40,000 in cash for her share of goodwill but Erica is unable to contribute any amount for her share of goodwill.
At the time of Deepa's and Erica's admission, the firm had an Advertisement Suspense Account of ₹ 56,000 which is written off.

You are required to pass necessary journal entries to record the above adjustments at the time of admission of Deepa and Erica.

Answer 1

Journal Entries
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Benu's Capital A/c    ...Dr.		35,000
	Leena's Capital A/c     ...Dr.		21,000
	To Advertisement Suspense A/c			56,000
	(Advertisement Suspense Account written off)
2.	Bank A/c     ...Dr.		1,40,000
	To Deepa's Capital A/c			1,00,000
	To Premium for Goodwill A/c			40,000
	(Money received from Deepa as capital and goodwill)
3.	Premium for Goodwill A/c    ...Dr.		40,000
	To Benu's Capital A/c			26,000
	To Leena's Capital A/c			14,000
	(Goodwill money brought in by Deepa distributed between Benu and Leena in sacrificing ratio 13 : 7)
4.	Bank A/c    ...Dr.		1,00,000
	To Erica's Capital A/c			1,00,000
	(Capital brought in by Erica)
5.	Erica's Current A/c     ...Dr.		60,000
	To Benu's Capital A/c			39,000
	To Leena's Capital A/c			21,000
	(Erica's share of goodwill credited to Benu and Leena's account in sacrificing ratio i.e. 13 : 7)

Working Note:

Benu's sacrifice = Old Share - New Share

`= 5/8 - 3/10 = (50 - 24)/80 = 26/80`

Leena's sacrifice = Old Share - New Share

`= 3/8 - 2/10 = (30 - 16)/80 = 14/80`

Sacrificing ratio = 26 : 14 = 13 : 7

Goodwill of the firm `= 40,000 xx 10/2 = "₹" 2,00,000`

Goodwill share of Erica = `2,00,000 xx 3/10 = "₹" 60,000`

Deepa's share of goodwill = 40,000

Deepa' s share of profit = `2/10`