Question

On 1st April, 2025, A and B, sharing profits 2/3 and 1/3 respectively, agree to admit C into partnership on condition that he pays ₹ 3,00,000 as capital and ₹ 90,000 for 1/6 share of goodwill which he acquires equally from A and B. Subsequently, half amount of goodwill is withdrawn by the old partners.

Give journal entries necessary to record these transactions.

Answer 1

1. Calculate the Sacrificing Ratio

The problem states that C acquires his `1/6` share equally from A and B.

This means the sacrificing ratio between A and B is strictly 1 : 1.

Each partner surrenders: `1/6 xx 1/2 = 1/12` of the total profit share.

2. 

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2025
Apr 1	Bank/Cash A/c   ...Dr.		3,90,000
	To C's Capital A/c			3,00,000
	To Premium for Goodwill A/c			90,000
	(Being capital and premium for goodwill brought in cash by C)
Apr 1	Premium for Goodwill A/c   ...Dr.		90,000
	To A's Capital A/c			45,000
	To B's Capital A/c			45,000
	(Being premium for goodwill credited to old partners in their sacrificing ratio of 1 : 1)
Apr 1	A's Capital A/c   ...Dr.		22,500
	B's Capital A/c   ...Dr.		22,500
	To Bank/Cash A/c			45,000
	(Being half the amount of goodwill premium withdrawn by A and B)