Question

Anshul and Parul are partners sharing profits in the ratio of 3 : 2. They admit Payal as partner for 1/4th share in profits on 1st April, 2019. Payal brings RS.5,00,000 as capital and her share of goodwill by cheque. It was agreed to value goodwill at three year's purchase of average profit of last four years: <br><br> Additional Information: <br> 1. Closing stock for the year ended 31st March, 2018 was overvalued by RS.50,000. <br> 2. RS.1,00,000 should be charged annually to cover management cost. <br> Pass necessary Journal entries on Payal's admission.

​

Answer 1

A journal entry is the record of the transactions of the business in the business accounting books.

The correct journal entries are -

Bank A.c Dr 8,37,500

To Payal's Capital A/c 5,00,000

To Goodwill premium A/c 3,37,500

( Being capital and goodwill paid by new partner)

Premium for goodwill A/c Dr 3,37,500

To Anshul Capital A/c 2,02,500

To Parul's Capital A/c 1,35,000

( Being premium for goodwill adjusted)

Working Notes

Ratio = 3:2

Anshul's Capital = 3,37,500  × 3/5 = 2,02,500

Payal's Capital = 3,37,500  × 2/5 = 1,35,000