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Give the Necessary Journal Entries: - Accountancy

Journal Entry

Verma and Sharma are partners in a firm sharing profits and losses in the ratio of 5:3. They admitted Ghosh as a new partner for 1/5 share of profits. Ghosh is to bring in Rs. 20,000 as capital and Rs. 4,000 as his share of goodwill premium. Give the necessary journal entries:
a) When the amount of goodwill is retained in the business.
b) When the amount of goodwill is fully withdrawn.
c) When 50% of the amount of goodwill is withdrawn.
d) When goodwill is paid privately.

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Solution

Journal Entries

S.No.

 

Particulars

 

L.F.

Debit Amount Rs

Credit Amount Rs

Case (a)

 

   

 

 

 

 

Cash A/c

Dr.

 

24,000

 

 

 

To Ghosh's Capital A/c

 

 

 

20,000

 

 

To Premium for Goodwill A/c

 

 

 

4,000

 

(Capital and Goodwill his share brought

 by Ghosh)

 

 

 

 

 

 

   

 

 

 

 

Premium for Godwill A/c

Dr.

 

4,000

 

 

 

To Verma's Capital A/c

 

 

 

2,500

 

 

To Sharma's Capital A/c

 

 

 

1,500

 

(Goodwill brought by Ghosh credited to Old Partners in Sacrificing ratio)

 

 

 

 

 

   

 

 

 

Case (b)

Cash A/c

Dr.

 

24,000

 

 

 

To Ghosh Capital A/c

 

 

 

20,000

 

 

To Premium for Goodwill A/c

 

 

 

4,000

 

(Capital and Goodwill brought by Ghosh for (1/5) share of profit)

 

 

 

 

 

 

   

 

 

 

 

Premium for Goodwill A/c

Dr.

 

4,000

 

 

 

To Verma's Capital A/c

 

 

 

2,500

 

 

To Sharma's Capital A/c

 

 

 

1,500

 

(Goodwill brought by Ghosh credited in Old  Partner in Sacrificing Ratio)

 

 

 

 

 

   

 

 

 

 

Verma's Capital A/c

Dr.

 

2,500

 

 

Sharma's Capital A/c

Dr.

 

1,500

 

 

 

To Cash A/c

 

 

 

4,000

 

(Amount of Premium for Goodwill withdrawn by

 Old Partners)

 

 

 

 

 

   

 

 

 

Case (c)

Cash A/c

Dr.

 

24,000

 

 

 

To Ghosh's Capital A/c

 

 

 

20,000

 

 

To Premium for Goodwill A/c

 

 

 

4,000

 

(Capital and Goodwill brought by Ghosh for (1/5)

share of profit)

 

 

 

 

 

 

   

 

 

 

 

Premium for Goodwill A/c

Dr.

 

4,000

 

 

 

To Verma's Capital A/c

 

 

 

2,500

 

 

To Sharma's Capital A/c

 

 

 

1,500

 

(Premium for Goodwill credited to Old Partner's

Captial Account in sacrificing ratio)

 

 

 

 

 

   

 

 

 

 

Verma's Capital A/c

Dr.

 

1,250

 

 

Sharma's Capital A/c

 

 

750

 

 

 

To Cash A/c

 

 

 

2,000

 

(Half of the amount of premium for goodwill  withdrawn by Old partners)

 

 

 

 

 

   

 

 

 

Case (d)

No entry: Goodwill was not brought in to firm

 

 

 

 

  Is there an error in this question or solution?
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APPEARS IN

NCERT Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts
Chapter 3 Reconstitution of a Partnership Firm – Admission of a Partner
Exercise | Q 18 | Page 166
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