Question

Give the journal entries to record the following arrangements in the book of the firm. b and c are partners sharing profits in the ratio of 3:2. d is admitted paying a premium (goodwill) of 4000 for 1/4 share of the profit. share of b and c remaining as before. no goodwill account appears in the book

Answer 1

Answer:

1) Cash a/c. Dr ₹4,000

To Premium for goodwill a/c. ₹4,000

(Being premium for goodwill brought in cash)

2) Premium for goodwill a/c. Dr ₹4,000

To B's Capital a/c. ₹2,400

To C's Capital a/c. ₹1,600

(Being premium for goodwill distributed between sacrificing partners on their sacrificing ratio)

Explanation:

B & C remain their profit sharing ratio as before.

So, Sacrificing ratio = 3:2