Question

A and B are partners sharing profits and losses in the ratio of 3 : 2. They admit C as partner in the firm for 1/4th share in profits which he takes 1/6th from A and 1/12th from B. C brings in only 60% of his share of firm's goodwill. Goodwill of the firm has been valued at ₹ 1,00,000. Pass necessary journal entries to record this arrangement.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Bank A/c	Dr.		15,000
	To Premium for Goodwill A/c				15,000
	(Goodwill brought in cash)
	Premium for Goodwill A/c	Dr.		15,000
	To A’s Capital A/c				10,000
	To B’s Capital A/c				5,000
	(Goodwill distributed between A & B in sacrificing ratio)
	C’s Capital A/c	Dr		10,000
	To A’s Capital A/c				6,667
	To B’s Capital A/c				3,333
	(Goodwill adjusted)

Working Notes:
WN1: Calculation of Sacrificing Ratio
A's sacrifice = `1/6` × `2/2` = `2/12`

B's sacrifice = `1/12`

∴Sacrificing Ratio between A and B = 2:1

WN2: Calculation of share in goodwill of new partner
C's share in goodwill = 1,00,000 × `1/4` = Rs 25,000

Goodwill brought in cash Rs 15,000 (25,000×60%)

Remaining goodwill of Rs 10,000 will be adjusted through C's Capital A/c.