Question

A and B are partners sharing profits in the ratio of 3:2 . They admit C into partnership. C paying a premium of Rs.1000 for 1/4 share of profit. No Goodwill account appears in the books. They withdraw the amount of Goodwill. Explain and journalise.

Answer 1

working note 

new ratio

A = 3/5*3/4=9/20
B=2/5*3/4= 6/20
C+1/4*5/5=5/20

therefore new ratio = 9:6:5
  
1) preimum on goodwill A/c    dr    1000
           To A    A/c                                            600
            To B    A/c                                           400
  (being goodwill shared in old ratio)

2)A  A/c         Dr                                   450
   B   A/c        Dr                                   300
   C   A/c        Dr                                    250
          To premium on goodwill A/c                       1000
(being goodwill entry reversed )