Question

A and B were partners in a firm sharing profits and losses in the ratio of 3 : 2. They admitted C as a new partner for 3/7th share in the profit and the new profit-sharing ratio will be 2 : 2 : 3. C brought ₹ 2,00,000 as his capital and ₹ 1,50,000 as premium for goodwill. Half of their share of premium was withdrawn by A and B from the firm. Calculate sacrificing ratio and pass necessary Journal entries for the above transactions in the books of the firm.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Cash A/c	Dr.		3,50,000
	To C’s Capital A/c				2,00,000
	To Premium for Goodwill A/c				1,50,000
	(C brought capital and Premium for Goodwill)
	Premium for Goodwill A/c	Dr.		1,50,000
	To A’s Capital A/c				1,10,000
	To B’s Capital A/c				40,000
	(Premium for Goodwill distributed)
	A’s Capital A/c	Dr.		55,000
	B’s Capital A/c	Dr.		20,000
	To Cash A/c				75,000
	(Half of the goodwill withdrawn by A and B)

Calculation of Sacrificing Ratio :
Sacrificing Ratio = Old Ratio - New Ratio
A's = `3/5 - 2/7` = `11/35`

B's = `2/5 - 2/7 = 4/35`

Sacrificing Ratio = `11/35 : 4/35` = 11 : 4

Working Notes-
WN1 : Distribution of Premium for Goodwill
A will get = 1,50,000 x `11/15` = Rs. 1,10,000

B will get = 1,50,000 x `4/15` = Rs. 40,000

WN2 : Amount of Premium for Goodwill withdrawn
A will withdrawn = 1,10,000 x `1/2` = Rs. 55,000

B will withdrawn = 40,000 x `1/2` = Rs. 20,000.