Question

Balram and Chris are partners in a firm sharing profits and losses in the ratio of 3 : 2. They admitted Ahmed on 1st April, 2023.

Balram gifted 1/5th of his share to Ahmed, and Chris gave 2/5th of his share to Ahmed. The goodwill of the firm is 10,000.

You are required to:

1. Find out the new profit-sharing ratio among the partners.
2. Pass the journal entry for premium for goodwill, if Ahmed is unable to bring his share of goodwill in cash.

Answer 1

(a) Balram's gifted share \[= \frac{1}{5}\text{ th of } \frac{3}{5} = \frac{3}{25}\]

$$\text{Balram's New Share} = \frac{3}{5} - \frac{3}{25} = \frac{12}{25}$$

$$\text{Chris's Sacrificed Share} = \frac{2}{5}\text{ th of } \frac{2}{5} = \frac{4}{25}$$

$$\text{Chris's New Share} = \frac{2}{5} - \frac{4}{25} = \frac{6}{25}$$

$$\text{Ahmed's Share} = \frac{3}{25} + \frac{4}{25} = \frac{7}{25}$$

New profit sharing ratio of Balram, Chris and Ahmed $= \frac{12}{25} : \frac{6}{25} : \frac{7}{25}$ or $12 : 6 : 7$

(b) 

JOURNAL
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Ahmed's Current A/c (Note)   ...Dr.		1,600
	To Chris's Capital A/c			1,600
	(Journal entry passed for adjustment of premium for goodwill)

Working Note:

(1) Since Ahmed has received $\frac{3}{25}$ share from Balram as a gift, he need not compensate proportionate amount of goodwill to Balram.

(2) Ahmed has to compensate only to Chris, equivalent to sacrifice made by Chris i.e., $₹10,000 \times \frac{4}{25} = ₹1,600$