Question

Arti and Bharti are partners in a firm sharing profits in 3:2 ratio, They admitted Sarthi for 1/4 share in the profits of the firm. Sarthi brings Rs. 50,000 for his capital and Rs. 10,000 for his 1/4 share of goodwill. Goodwill already appears in the books of Arti and Bharti at Rs. 5,000. the new profit sharing ratio between Arti, Bharti and Sarthi will be 2:1:1. Record the necessary journal entries in the books of the new firm?

Answer 1

Journal Entries
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
	Arti's Capital A/c		Dr.		3,000
	Bharti's Capital A/c		Dr.		2,000
	To Goodwill A/c					5,000
	(Goodwill written off)
	Cash A/c		Dr.		60,000
	To Sarthi's Capital A/c					50,000
	To Premium for Goodwill A/c					10,000
	(Amount of capital and share of goodwill brought by Sarthi)
	Premium for Goodwill A/c		Dr.		10,000
	To Arti's Capital A/c					4,000
	To Bharti’s Capital A/c					6,000
	(Premium for Goodwill credited Arti's Capital Account)

Old Ratio =  Arti : Bharti
                = 3 : 2
Sarthi admitted for ` 1/4` share in new firm.

New Ratio = Arti : Bharti : Sarthi
                  = 2 : 1 : 1
Sacrificing Ratio = Old Ratio − New Ratio

Arti = `3/5 - 2/4 = 2/20`

Bharti = `2/5 - 1/4 = 3/20`

Arti will receive = 10,000 x `2/5` = 4,000

Bharti will receive = 10,000 x `3/5` = 6,000.