Question

Arjun and Vinod are partners sharing profits in the ratio of 3 : 1. They admitted a new partner Prabhakar.

Arjun sacrificed `1/3`rd of his share to Prabhakar and Vinod gifted `1/5`th of his share to Prabhakar. Firm's goodwill on the date of Prabhakar's admission was valued at ₹ 3,60,000.

Ascertain the new profit sharing ratio of the partners and pass the journal entry for premium for goodwill, if Prabhakar is unable to bring his share of goodwill in cash.

Answer 1

(i) Calculation of New Profit Sharing Ratio:

Share sacrificed by Arjun = `1/3  "of"  3/4 = 3/12`

Arjun's new share in profit = `3/4 - 3/12 = 6/12`

Share gifted by Vinod = `1/5  "of"  1/4 = 1/20`

Vinod's new share in profit = `1/4 - 1/20 = 4/20`

Prabhakar's share in profit = `3/12 + 1/20 = 18/60`

New profit sharing ratio of Arjun, Vinod and Prabhakar

= `6/12 : 4/20 : 18/60 = (30 : 12 : 18)/60 = 30 : 12 : 18 or 5 : 2 : 3`

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	Prabhakar's Current A/c   ...Dr.		90,000
	To Arjun's Capital A/с			90,000
	(Premium for goodwill credited to Arjun's Capital A/с)

Working note:

Since Vinod has gifted a `1/20` share to Prabhakar, Prabhakar need not compensate the proportionate amount of goodwill to Vinod.