Question

Tony and Sony are partners in a firm sharing profits and losses in the ratio of 4 : 3. On 1^st April, 2025, they admit Ronny for `1/3` share in the profits.

Other information:

(a) Ronny brought in Land and Building worth ₹ 5,00,000 and Furniture worth ₹ 50,000 but was unable to contribute any amount for his share of Goodwill.

(b) At the time of Ronny’s admission, the firm showed the following balances:

Advertisement Suspense A/c	₹ 49,000
General Reserve	₹ 56,000
Profit and Loss A/c (Dr)	₹ 70,000
Goodwill	₹ 42,000
Employees’ Provident Fund	₹ 21,000
Loan from Sony (taken on 1st January 2025)	₹ 1,00,000

(c) Revaluation loss amounted to ₹ 7,000.

(d) Goodwill of the firm valued at ₹ 21,000.

You are required to:

1. Pass journal entries for the above transactions on the date of Ronny’s admission.
2. Pass journal entries regarding loan taken from Sony for the year 2024-25.
   (Interest on loan is still due to be paid.)

Answer 1

i.

Journal entries in the books of the firm
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2025
April 1	Land & Building A/c   ...Dr.		5,00,000	-
	Furniture A/c   ...Dr.		50,000	-
	To Ronny’s Capital A/c		-	5,50,000
	(Being capital brought in into the business)
April 1	Ronny’s Current A/c   ...Dr.		7,000	-
	To Tony’s Capital A/c		-	4,000
	To Sony’s Capital A/c		-	3,000
	(Being goodwill adjusted through current account of new partner)
April 1	General Reserve A/c   ...Dr.		56,000	-
	To Tony’s Capital A/c		-	32,000
	To Sony’s Capital A/c		-	24,000
	(Being general reserve transferred)
April 1	Tony’s Capital A/c   ...Dr.		68,000	-
	Sony’s Capital A/c   ...Dr.		51,000	-
	To Advertisement suspense A/c		-	49,000
	To Profit & loss A/c		-	70,000
	(Being accumulated losses distributed among the partners)
April 1	Tony’s Capital A/c   ...Dr.		24,000	-
	Sony’s Capital A/c   ...Dr.		18,000	-
	To Goodwill A/c		-	42,000
	(Being goodwill written off among partners)
April 1	Tony’s Capital A/c   ...Dr.		4,000	-
	Sony’s Capital A/c   ...Dr.		3,000	-
	To Revaluation A/c		-	7,000
	(Being revaluation loss transferred)

ii.

Journal entries in the books of the firm
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2025
April 1	Bank A/c   ...Dr.		1,00,000	-
	To Sony’s Loan A/c		-	1,00,000
	(Being loan taken from Sony)
March 31	Interest on Loan A/c   ...Dr.		1,500	-
	To Sony’s Loan A/c		-	1,500
	(Being interest due on sony’s loan recorded)
March 31	Profit & loss A/c   ...Dr.		1,500	-
	To Interest on loan A/c		-	1,500
	(Being interest on loan account transferred)

Working Note:

The old profit-sharing ratio of Tony and Sony is 4 : 3

Calculate the new profit-sharing ratio:

Remaining share for Tony and Sony = `1 − 1/3`

= `2/3`

Tony’s new share = `2/3 xx 4/7 = 8/21`

Sony’s new share = `2/3 xx 3/7 = 6/21`

Ronny’s share = `1/3 or 7/21`

New Ratio (Tony : Sony : Ronny) = 8 : 6 : 7

Sacrificing Ratio = Old Share − New Share

Tony’s sacrifice = `4/7 - 8/21`

= `(12 - 8)/21`

= `4/21`

Sony’s sacrifice = `3/7 - 6/21`

= `(9 - 6)/21`

= `3/21`

Calculation and Adjustment of Goodwill:

Total value of the firm’s goodwill = ₹ 21,000

Ronny’s share of goodwill = Total Goodwill × Ronny’s Share 

= ₹ 21,000 × `1/3`

= ₹ 7,000

Tony’s share = ₹ 7,000 × `4/7`

= ₹ 4,000

Sony’s share = ₹ 7,000 × `3/7`

= ₹ 3,000