Question

A and B were partners in a firm sharing profits and losses in the ratio of 3 : 2. They admitted C as a new partner for 3/7th share in the profit and the new profit-sharing ratio will be 2 : 2 : 3. C brought ₹ 2,00,000 as his capital and ₹ 1,50,000 as premium for goodwill. Half of their share of premium was withdrawn by A and B from the firm. Calculate sacrificing ratio and pass necessary journal entries for the above transactions in the books of the firm.
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A and B are partners sharing profits in the ratio of 2 : 1. They admit C for 1/4th share in profits C brings in ₹ 30,000 for his capital and ₹ 8,000 out of his share ₹ 10,000 for goodwill. Before admission, goodwill appeared in books at ₹ 18,000. Give journal entries to give effect to the above arrangements.

Answer 1

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Answer 2

Explanation:

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio - New Ratio

$A^{\prime} s=\frac{3}{5}-\frac{2}{7}=\frac{11}{35}$

$B^{\prime} s=\frac{2}{5}-\frac{2}{7}=\frac{4}{35}$

$A: B$

Sacrificing Ratio = $\frac{11}{35}: \frac{4}{35}$

= $11: 4$

Working Notes:

Working Notes 1:

Distribution of Premium for Goodwill

A will get = $1,50,000 \times \frac{11}{15}$ = $\mathrm{Rs} 1,10,000$

B will get = $1,50,000 \times \frac{4}{15}$ = $\mathrm{Rs} 40,000$

Working Notes 2:

Amount of Premium for Goodwill withdrawn

A will withdrawn = $1,10,000 \times \frac{1}{2}=\mathrm{Rs} 55,000$

B will withdrawn = $40,000 \times \frac{1}{2}=\mathrm{Rs} 20,000$

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Working Notes:

Working Notes 1:

Writing-off of Goodwill

A's Capital account will be Debited by = $18,000 \times \frac{2}{3}=\mathrm{Rs} 12,000$

B's Capital account will be Debited by = $18,000 \times \frac{1}{3}=\mathrm{Rs} 6,000$

Working Notes 2:

Distribution of C's share of Goodwill

A will get = $10,000 \times \frac{2}{3}$ $=\mathrm{Rs} 6,667$

B will get =$10,000 \times \frac{1}{3}$ $=R s 3,333$