Question

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b) When the amount of goodwill is fully withdrawn.
c) When 50% of the amount of goodwill is withdrawn.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.

Answer 1

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	(Amount of Premium for Goodwill withdrawn by  Old Partners)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	(Half of the amount of premium for goodwill  withdrawn by Old partners)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