Question

A and B are partners in a firm. Their profit sharing ratio is 5:3. They admit C into partnership for 1/4th

share. As between themselves A and B decide to share profits equally in future. C brings in

Rs.1,20,000 as his capital and Rs. 60,000 as premium. Calculate the sacrificing ratio and record the

necessary journal entries on the assumption that the amount of premium brought in by C is retained in

business.​

Answer 1

Answer:

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

Answer 2

1/2=5000

hope its help you