Question

Hemant and Nishant were partners in a firm sharing profits in the ratio of 3 : 2. Their capitals were ₹ 1,50,000 and ₹ 1,30,000 respectively. They admitted Somesh on 1st April, 2024 as a new partner for a `1/5` share in the future profits. Loss on Revaluation amounted to ₹ 20,000. Somesh brought ₹ 1,20,000 as his capital. Calculate the value of goodwill of the firm and record necessary journal entries for the above transactions on Somesh’s admission.

Answer 1

Journal Entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	Cash A/c   ...Dr.		1,20,000
	To Somesh’s Capital A/c			1,20,000
	(Somesh brought his share capital)
	Somesh’s Current A/c   ...Dr.		44,000
	To Hemant’s Capital A/c			26,400
	To Nishan’s Capital A/c			17,600
	(The amounts credited to Hemant and Nishant are in their old profit ratio: 3 : 2)
	Hemant’s Capital A/c   ...Dr.		20,000
	Nishan’s Capital A/c   ...Dr.			12,000
	To Revaluation A/c			8,000
	(Loss on revaluation distributed among old partners in their old ratio)

Calculation of hidden goodwill:

Expected total capital = `1,20,000 xx 5/1`

= 6,00,000

Calculate the total actual capital of the partners after revaluation:

Total partners’ capital = `1,50,000 + 1,30,000 + 1,20,000`

= 4,00,000

Less: Loss on Revaluation = ₹ 20,000

= 4,00,000 − 20,000

= 3,80,000

Determine the value of the firm’s goodwill:

Goodwill = Expected Total Capital − Actual Capital

= 6,00,000 − 3,80,000

= 2,20,000

Calculate Somesh’s share of goodwill:

Somesh’s share of goodwill = `2,20,000 xx 1/5`

= 44,000

For the loss on revaluation:

Hemant’s share of loss =`20,000 xx 3/5`

= 12,000

Nishant’s share of loss = `20,000 xx 2/5`

= 8,000