Passen
Ajay and Alok are partners sharing profits and losses in the ratio of 2 1. They agree to admit Anil, their
Manager, into partnership who is to get 1/3rd share in the business. Anil brings in 10,000 for his capital
and 73.000 for 1/3rd share of goodwill. Ajay, Alok and Anil agree to share future profits equally. The amount
of goodwill is withdrawn from the business.
Make necessary Journal entries in connection with Anil's admission
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Answers
Answer:
A and B are partners sharing profits and losses in the proportion of 7:5. They agree to admit C, their Manager, into partnership who is to get 1/6
th
share in the business. C brings in Rs.10,000 for his capital and Rs.3,600 for the 1/6
th
share of goodwill which he acquire 1/24
th
from A and 1/8
th
from B. The profits for the first year of the new partnership amount to Rs.24,000. Pass necessary journal entries in connection with C
admission and apportion the profits between the partners.
Explanation:
When the new partner purchases his share of profit from the old partners equally : In such cases, the new profit sharing ratio of the old partners can be calculated by deducting the sacrifice made by them from their existing share of profit.
Let total profit be = 1
Share given to P = 1/6
Remaining Share = 1 – 1/6 = 5/6
Share of profits given to C = 1/6
Share acquired by C from A = ½ of 1/6 = 1/12
Share acquired by C from B = ½ of 1/6 = 1/12
Therefore,
A’s new share = 7/12 – 1/12 = 6/12
B’s new share = 5/12 – 1/12 = 4/12
C’s share = 1/6
Hence, new profit sharing ratio will be
A : B : C
6/12 : 4/12 : 1/6 =
3 : 2 : 1
X and Y are partners in a firm sharing profits in the ratio of 7 : 5. Z is admitted on 1/6th share which he takes 1/24th from X and 1/8th from Y. Calculate the new profit sharing of the partners.
Solution:
X’s old share = 7/12, out of which he surrenders 1/24th in favour of Z.
Therefore, X’s new share = 7/12 – 1/24 = 13/24
Y’s old share = 5/12, out of which he surrenders 1/8th in favour of Z.
Therefore, Y’s new share = 5/12 – 1/8 = 7/24
Z’s share = 1/6
Hence, new profit sharing ratio will be
X : Y : Z
13/24 : 7/24 : 1/6 =
13 : 7 : 4
Example: X, Y and Z are partners in proportion of 3/6, 2/6 and 1/6 respectively. P was admitted in the firm as a new partner with 1/6th share. Calculate the new profit sharing ratios of the partners.
Solution:
Let total profit be = 1
Share given to P = 1/6
Remaining Share = 1 – 1/6 = 5/6
Now the old partners will share this remaining profit in their old profit sharing ratios. Hence,
X’s share = 3/6 of 5/6 = 5/12
Y’s share = 2/6 of 5/6 = 5/18
Z’s share = 1/6 of 5/6 = 5/36
Thus, the new profit sharing ratio will be
X : Y : Z : P
5/12 : 5/18 : 5/36 : 1/6 =
15 : 10 : 5 : 6
2. When the new partner purchases his share of profit from the old partners equally : In such cases, the new profit sharing ratio of the old partners can be calculated by deducting the sacrifice made by them from their existing share of profit.
Example: A and B are partners sharing profits and losses in the ratio of 7/12 : 5/12. They admit C as a new partner for 1/6th share, which he acquires equally from A and B. Calculate the new profit sharing ratios of the partners
Solution:
Share of profits given to C = 1/6
Share acquired by C from A = ½ of 1/6 = 1/12
Share acquired by C from B = ½ of 1/6 = 1/12
Therefore,
A’s new share = 7/12 – 1/12 = 6/12
B’s new share = 5/12 – 1/12 = 4/12
C’s share = 1/6
Hence, new profit sharing ratio will be
A : B : C
6/12 : 4/12 : 1/6 =
3 : 2 : 1
3. When new partner purchases his share from the old partners in a particular ratio: In this case, the new profit sharing ratio of the old partners will be ascertained after deducting the sacrifice made by them from their existing share of profit.
Example: X and Y are partners in a firm sharing profits in the ratio of 7 : 5. Z is admitted on 1/6th share which he takes 1/24th from X and 1/8th from Y. Calculate the new profit sharing of the partners.
Solution:
Now the old partners will share this remaining profit in their old profit sharing ratios. Hence,
X’s share = 3/6 of 5/6 = 5/12
Y’s share = 2/6 of 5/6 = 5/18
Z’s share = 1/6 of 5/6 = 5/36
Thus, the new profit sharing ratio will be
X : Y : Z : P
5/12 : 5/18 : 5/36 : 1/6 =