Question

Leela and Meeta were partners in a firm sharing profits and losses in the ratio of 5:3. On Is Jan. 2017 they admitted Om as a new partner. On the date of Om’s admission the balance sheet of Leela and Meeta showed a balance of Rs 16,000 in general reserve and Rs 24,000 (Cr) in Profit and Loss Account. Record necessary journal entries for the treatment of these items on Om’s admission. The new profit sharing ratio between Leela, Meeta and Om was 5:3:2.

Answer 1

Given : Leela and Meeta were partners in a firm sharing profits and losses in the ratio of 5:3. On Is Jan. 2017 they admitted Om as a new partner. On the date of Om’s admission the balance sheet of Leela and Meeta showed a balance of Rs 16,000 in general reserve and Rs 24,000 (Cr) in Profit and Loss Acco…….The new profit sharing ratio between Leela, Meeta and Om was 5:3:2.

Concept :  

Whenever any partner is admitted in the existing firm , the existing partners lose a part of their share in favour of a new partner to get him a particular share. Thus, the sum of the sacrificed shares  becomes the new partner's share. The new partner is required to compensate the acquired share of profit by paying his share of goodwill to the existing partners which they receive through adjustments in the capital accounts or current accounts in sacrificing ratio.  

 

Journal entries for the treatment of the above  items on Om’s admission are in the attachment below :  

 

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