A and B are partners sharing profits and losses in the ratio of 4: 3. They admit 'C' into partnership to 1/5 share who pays Rs. 3,500 in cash for goodwill. A and B decide to share future profits equally among themselves. No good will appears in the books.find the sacrificing ratio?
Answers
Explanation:
. 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