A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. A new partner C is admitted. A surrenders 1/5th of his share and B surrenders 2/5th of his share and B surrenders 2/5th of his share in favour of C. For the purpose of C's admission, goodwill of the firm is valued at ₹ 75,000 and C brings in his share of goodwill in cash which is retained in the firm's books. Journalise the above transactions.
Solution
Date 
Particulars 
L.F. 
Debit Amount Rs 
Credit Amount Rs 


Cash A/c 
Dr. 

21,000 


To Premium for Goodwill A/c 



21,000 

(C brought Premium for Goodwill) 











Premium for Goodwill A/c 
Dr. 

21,000 


To A’s Capital A/c 



9,000 

To B’s Capital A/c 



12,000 

(Premium for Goodwill brought by C distributed between A and B in sacrificing ratio i.e. 3:4) 



Old Ratio = A : B = 3 : 2
A's Sacrificing = `3/5 xx 1/5 = 3/25`
B's Sacrificing = `2/5 xx 2/5 = 4/25`
Sacrificing Ratio = A : B
= `3/25 : 4/25` = 3 : 4
New Ratio = Old Ratio  Sacrificing Ratio
A's = `3/5  3/25 = 12/25`
B's = `2/5  4/25 = 6/25`
C’s share = A’s sacrifice + B’s sacrifice
= `3/25 + 4/25 = 7/25`
New Ratio is 12 : 6 : 7
C’s will bring Premium for Goodwill = 75,000 x `7/25`
= Rs. 21,000
Distribution of Premium for Goodwill =
A will get = 21,000 x `3/7` = Rs. 9,000
B will get = 21,000 x `4/7` = Rs. 12,000.