Question

Ashnir and Javed are equal partners with Capitals of ₹ 3,00,000 and ₹ 2,50,000 respectively. The firm had a debit balance of ₹ 50,000 in Profit & Loss A/c. New partner Daniel is admitted with a capital of ₹ 1,20,000.

Ashnir sacrificed `1/5`th of his share and Javed sacrificed `1/20` from his share to Daniel.

Pass necessary journal entries with regard to Capital and Goodwill on Daniel’s admission.

Answer 1

JOURNAL
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Bank A/c   ...Dr.		1,20,000
	To Daniel's Capital A/c			1,20,000
	(Capital introduced by Daniel)
	Daniel's Current A/c (\[\frac{3}{20} \times 1,80,000\])   ...Dr.		27,000
	To Ashnir's Capital A/c			18,000
	To Javed's Capital A/c			9,000
	(Daniel's share in hidden goodwill credited to Ashnir and Javed in sacrificing ratio 2 : 1)

Working Notes:

Calculation of Sacrifice Ratio:

Ashnir's sacrifice = $\frac{1}{5}$ th of $\frac{1}{2} = \frac{1}{10}$

Javed's sacrifice =  $\frac{1}{20}$

Sacrifice ratio of Ashnir and Javed is = $\frac{1}{10} : \frac{1}{20}$ or 2 : 1

Share of Daniel = $\frac{1}{10} + \frac{1}{20} = \frac{2 + 1}{20} = \frac{3}{20}$

Calculation of Hidden Goodwill:

Based on Daniel's Capital, Total Capital of Firm should be
$ = ₹ 1,20,000 \times \frac{20}{3}$

₹ 8,00,000

Less: Combined Capital of all partners

Combined Capital of Ashnir and Javed $(3,00,000 + 2,50,000 - 50,000) = 5,00,000$

Capital of Daniel = 1,20,000

= 5,00,000 + 1,20,000

= 6,20,000

Firm's Goodwill = 8,00,000 − 6,20,000

= 1,80,000