Question

K and Y were partners in a firm sharing profits in 3 : 2 ratio. They admitted Z as a new partner for `1/3`rd share in the profits of the firm. Z acquired his share from K and Y in 2 : 3 ratio. Z brought ₹ 80,000 for his capital and ₹ 30,000 for his `1/3`rd share as premium. Calculate the new profit sharing ratio of K, Y and Z and pass necessary journal entries for the above transactions in the books of the firm.

Answer 1

Journal Entries
Date	Prticulars	L.F.	Debit (₹)	Credit (₹)
	Bank A/c   ...Dr.		1,10,000
	To Z’s Capital A/c			80,000
	To Premium for Goodwill A/c			30,000
	(Being cash brought in by Z for capital and goodwill)
	Premium for Goodwill A/c   ...Dr.		30,000
	To K’s Capital A/c			12,000
	To Y’s Capital A/c			18,000
	(Premium for goodwill transferred to old partners in sacrificing ratio i. e., 2 : 3)

Calculate the new profit sharing ratio:

Z takes his share from K = `2/5 xx 1/3`

= `2/15`

Z takes his share from Y = `3/5 xx 1/3`

= `3/15`

Therefore, K’s new share = `3/5 - 2/15`

= `(3 xx 3)/(5 xx 3) - 2/15`

= `9/15 - 2/15`

= `(9 - 2)/15`

= `7/15`

Y’s new share = `2/5 - 3/15`

= `(2 xx 3)/(5 xx 3) - 3/15`

= `6/15 - 3/15`

= `(6 - 3)/15`

= `3/15`

Z’s new share = `1/3`

= `(1 xx 5)/(3 xx 5)`

= `5/15`

New profit sharing ratio K, Y, and Z = `7/15 : 3/15 : 5/15` or 7 : 3 : 5