Question

A and B are partners sharing profits in the ratio 3:2. They admit C as a new partner, C pays a premium ₹3000 for 3/10th share of profits, which he acquires for A and B in the ratio 2:1. Goodwill account appears in the books at ₹2000. Give the necessary journal entries ​

Answer 1

Answer:

Old ratio (A and B) = 3 : 2

C is admitted for 1/5 th share

A's sacrifice in favour of C = (1/5) * (1/2) = (1/10)

B's sacrifice in favour of C = (1/5) * (1/2) = (1/10)

New ratio = Old ratio - Sacrificing ratio

A's new ratio = (3/5) - (1/10) = 5/10 or 1/5

B's new share = (2/5) - (1/10) = 3/10

Cs share = A's sacrifice + B's sacrifice

= (1/10) + (1/10)

= 2/10

Therefore, new profit sharing ratio of A, B and C is 5 : 3 : 2