Question

A and B are partners in a firm sharing profits in 2 : 1 ratio. They admitted C for 1/4th share in profits
on 1st April, 2019. C was to bring 30,000 as capital. The Balance Sheet of A and B as at 31st March,
2019 (before C’s admission)

Answer 1

Explanation:

JOURNAL

1. A's Capital a/c.... Dr. 12000

B's Capital a/c.... Dr. 6000

To Goodwill a/c 18000

(Being goodwill written off in the ratio of 2:1)

2. Cash a/c.... Dr. 38000

To C's Capital a/c 30000

To Premium for Goodwill a/c 8000

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

3. Premium for Goodwill a/c... Dr. 8000

C's Capital a/c.... Dr. 2000

To A's Capital a/c 6667

To B's Capital a/c 3333

(Being premium for goodwill distributed among the partners in the ratio of 2:1)

Working Note:

Distribution of premium for goodwill:

A's share= 10000 * 2/3= 6667

B's share= 10000 * 1/3= 3333

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