Question

Piyush and Deepika are partners sharing profits in the ratio 7 : 3. They admit Seema as a new partner, paying ₹ 40,000 as premium for 1/5 share. The new ratio being 5 : 3 : 2. Pass journal entries.

Answer 1

Journal Entries in the Books of the Firm
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank/Cash A/c   ...Dr.		40,000
	To Premium for Goodwill A/c			40,000
	(Being premium for goodwill brought in cash by Seema for her 1/5th share)
2.	Premium for Goodwill A/c   ...Dr.		40,000
	To Piyush's Capital A/c			40,000
	(Being premium for goodwill transferred entirely to Piyush's capital account as he is the only sacrificing partner)

Working note:

To distribute the premium for goodwill, we must find out how much each old partner sacrificed.

Sacrifice = Old Share − New Share

Piyush's sacrifice = `7/10 - 5/10 = 2/10`

Deepika's sacrifice = `3/10 - 3/10 = 0`

Since Deepika's sacrifice is zero, Piyush is the sole sacrificing partner. The entire premium for goodwill brought by Seema will be credited to Piyush's Capital Account.