A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. They admit C into partnership for 1/5th share. C brings ₹ 30,000 as capital and ₹ 10,000 as goodwill. At the time of admission of C, goodwill appeared in the Balance Sheet of A and B at ₹ 3,000. New profitsharing ratio of the partners will be 5 : 3 : 2. Pass necessary Journal entries.
Solution
Journal Entries 

Date 
Particulars 
L.F. 
Debit Amount Rs 
Credit Amount Rs 


A’s Capital A/c 
Dr. 

1,800 


B’s Capital A/c 
Dr. 

1,200 


To Goodwill A/c 



3,000 

(Goodwill writtenoff) 











Cash A/c 
Dr. 

40,000 


To C’s Capital A/c 
Dr. 


30,000 

To Premium for Goodwill A/c 



10,000 

(C brought capital and his share of goodwill in cash) 











Premium for Goodwill 
Dr. 

10,000 


To A’s Capital A/c 



5,000 

To B’s Capital A/c 



5,000 

(Premium for Goodwill distributed) 




Old Ratio = A : B
= 3 : 2
New Ratio = A : B : C
= 5 : 3 : 2
Sacrificing Ratio = Old Ratio − New Ratio
A's = `3/5  5/10 = 1/10`
B's = `2/5  3/10 = 1/10`
Sacrificing Ratio = A : B
= `1/10 : 1/10` = 1 : 1
Distribution of Premium for Goodwill C’s share of Goodwill)
A and B each will get = 10,000 x `1/2` = Rs. 5,000 each
Goodwill writtenoff :
A will be debited by 3,000 x `3/5` = Rs. 1,800.
B will be credited by 3,000 x `2/5` = Rs. 1,200.