Question

X and Y are partners sharing profits in the ratio of 3 : 1. Z is admitted as a partner for which he pays ₹ 30,000 for goodwill in cash. X, Y and Z  decide to share the future profits in equal proportion. You are required to pass a single Journal entry to give effect to the above arrangement.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Cash A/c	Dr.		30,000
	To Premium for Goodwill A/c				30,000
	(X brought his share of goodwill)
	Premium for Goodwill A/c	Dr.		30,000
	Y’s Capital A/c	Dr.		7,500
	To X’s Capital A/c				37,500
	(Y and Z share of gain in goodwill transferred to X’s Capital Account)

Working Notes:
WN1 : Calculation of Sacrificing Ratio
Sacrificing Ratio = Old Ratio - New Ratio
X's = `3/4 - 1/3 = 5/12`

Y's = `1/4 - 1/3 = -1/12` (Gaining)

WN2 :
Goodwill of the firm on the basis of Z’s share
= 30,000 x `3/1` = Rs. 90,000.

Y's gain in goodwill = 90,000 x `1/12` = Rs. 7,500.

X will get as a goodwill = Z’s share of Goodwill + Y’s gain in Goodwill
= 30,000 + 7,500 = Rs 37,500