Question

13. Kaushik and Devan are partners in a firm sharing profits and losses in the ratio of
3:2. They admit Arjun into partnership with 1/4 share in profit. Arjun brings
30,000 for capital and his share of goodwill in cash. The goodwill of the firm is
valued at 20,000. Their new ratio is 2:1:1. Give journal entries.​

Answer 1

Explanation:

1. A's Capital a/c....                                       Dr.            1800

   B's Capital a/c....                                       Dr.            1200

           To Goodwill a/c                                                        3000

(Being goodwill written off in the ratio of 3:2)

2. Cash a/c..                                                Dr.             40000

           To C's Capital a/c                                                        30000

            To Premium for goodwill a/c                                      10000

(Being capital and premium for goodwill brought in by C)

3. Premium for Goodwill a/c...                   Dr.            10000

            To A's Capital a/c                                                      5000

            To B's Capital a/c                                                      5000

(Being premium for goodwill brought in by C distributed among the partners in the ratio of 1:1)

Working Note:

1. Calculation of sacrificing ratio:

A's sacrifice= 3/5- 5/10= 1/10

B's sacrifice= 2/5- 3/10= 1/10

Sacrificing ratio= 1:1

2. Distribution of premium for goodwill:

A's share= 10000 * 1/2= 5000

B's share= 10000 * 1/2= 5000