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Show necessary journal entries in the books of X, Y and Z? - Accountancy

Journal Entry

X and Y are partners in a firm sharing profits and losses in 4:3 ratio. They admitted Z for 1/8 share. Z brought Rs. 20,000 for his capital and Rs. 7,000 for his 1/8 share of goodwill. Subsequently X, Y and Z decided to show goodwill in their books at Rs. 40,000. Show necessary journal entries in the books of X, Y and Z?

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Solution

Journal Entries

Date

Particulars

L.F.

Debit Amount Rs

Credit Amount Rs

 

Cash A/c

Dr.

 

27,000

 

 

To Z's Capital A/c

 

 

 

20,000

 

To Premium for Goodwill A/c

 

 

 

7,000

 

(Amount of Capital and his share of Goodwill brought by Z)

 

 

 

 

 

 

   

 

 

 

 

Premium for Goodwill A/c

Dr.

 

7,000

 

 

To X's Capital A/c

 

 

 

4,000

 

To Y's Capital A/c

 

 

 

3,000

 

(Premium for Goodwill credit to Old Partners in Sacrificing Ratio)

 

 

 

 

 

   

 

 

 

 

Goodwill Rs 40,000 can not be raised. According to AS-10 Goodwill can be shown in the book if money and money value is paid for it. Here no money or money value has been paid for Goodwill.

 

 

 

Concept: Admission of a New Partner
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APPEARS IN

NCERT Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts
Chapter 3 Reconstitution of a Partnership Firm – Admission of a Partner
Exercise | Q 21 | Page 167
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