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Journal Entries: (A) When the Amount of Goodwill is Retained in the Business. (B) When the Amount of Goodwill is Fully Withdrawn. - 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 1/5th share of profits. Ghosh is to bring in ₹ 20,000 as capital and ₹ 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(b) When the amount of goodwill is fully withdrawn.
(c) When 50% of the amount of goodwill is withdrawn.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 broughtby 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 Partnersin 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(Amount of Premium for Goodwill withdrawn byOld Partners)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 Capital 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(Half of the amount of premium for goodwill withdrawn by Old partners)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 into firm      
  Is there an error in this question or solution?
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APPEARS IN

TS Grewal Class 12 Accountancy - Double Entry Book Keeping Volume 1
Chapter 5 Admission of a Partner
Exercise | Q 47 | Page 91
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