Question

A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. A new partner C is admitted. A surrenders 1/5th of his share and B surrenders 2/5th of his share and B surrenders 2/5th of his share in favour of C. For the purpose of C's admission, goodwill of the firm is valued at ₹ 75,000 and C brings in his share of goodwill in cash which is retained in the firm's books. Journalise the above transactions.

Answer 1

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Cash A/c	Dr.		21,000
	To Premium for Goodwill A/c				21,000
	(C brought Premium for Goodwill)
	Premium for Goodwill A/c	Dr.		21,000
	To A’s Capital A/c				9,000
	To B’s Capital A/c				12,000
	(Premium for Goodwill brought by C distributed between A and B in sacrificing ratio i.e. 3:4)

Old Ratio = A : B = 3 : 2
A's Sacrificing = `3/5 xx 1/5 = 3/25`

B's Sacrificing = `2/5 xx 2/5 = 4/25`

Sacrificing Ratio = A : B
                           = `3/25 : 4/25` = 3 : 4

 New Ratio = Old Ratio - Sacrificing Ratio
A's = `3/5 - 3/25 = 12/25`

B's = `2/5 - 4/25 = 6/25`

C’s share = A’s sacrifice + B’s sacrifice 
= `3/25 + 4/25 = 7/25`

New Ratio is 12 : 6 : 7
C’s will bring Premium for Goodwill = 75,000 x `7/25` 
= Rs. 21,000
Distribution of Premium for Goodwill =
A will get = 21,000 x `3/7` = Rs. 9,000

B will get = 21,000 x `4/7` = Rs. 12,000.