Question

Anu and Bhagwan were partners in a firm sharing profits in the ratio of 3 : 1. Goodwill appeared in the books at ₹ 4,40,000. Raja was admitted to the partnership. The new profit-sharing ratio among Anu, Bhagwan and Raja was 2 : 2 : 1. Raja brought ₹ 1,00,000 for his capital and necessary cash for his goodwill premium. Goodwill of the firm was valued at ₹ 2,50,000. Record necessary Journal entries in the books of the firm for the above transactions.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Anu’s Capital A/c	Dr.		3,30,000
	Bhagwan’s Capital A/c	Dr.		1,10,000
	To Goodwill A/c				4,40,000
	(Old goodwill written off in old ratio)
	Cash A/c	Dr.		1,50,000
	To Raja’s Capital A/c				1,00,000
	To Premium for Goodwill A/c				50,000
	(Capital and goodwill brought in by Raju)
	Premium for Goodwill A/c	Dr.		50,000
	Bhagwan’s Capital A/c `( 3/20 xx 2,50,000 )`	Dr.		37,500
	To Anu’s Capital A/c                    `( 7/20 xx 2,50,000 )`				87,500
	(Premium for goodwill adjusted)

Working Notes:
WN1 Calculation of Share in Old Goodwill

Anu's share = 4,40,000 x `3/4` = 3,30,000

Bhagwan's share = 4,40,000 x `1/4` = 1,10,000

WN2 Calculation of Raja's Share of Goodwill
Raja's Share of Goodwill = Firm's Goodwill x Raja's Profit Share

= 2,50,000 x `1/5` = 50,000

WN3 Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Share - New Share

Anu's = `3/4 - 2/5 = 7/20` (Sacrifice)

Bhagwan's = `1/4 - 2/5 = - 3/20` (gain)