Q. 38. A and B are partners sharing profits and losses in 3:2. They admit C into partnership for 1/5th share in the profits. find out sacrificing ratio.
Answers
A's Capital a/c.... Dr. 1800
B's Capital a/c.... Dr. 1200
To Goodwill a/c 3000
(Being goodwill written off in the ratio of 3:2)
2. Cash a/c.. Dr. 40000
To C's Capital a/c 30000
To Premium for goodwill a/c 10000
(Being capital and premium for goodwill brought in by C)
3. Premium for Goodwill a/c... Dr. 10000
To A's Capital a/c 5000
To B's Capital a/c 5000
(Being premium for goodwill brought in by C distributed among the partners in the ratio of 1:1)
Working Note:
1. Calculation of sacrificing ratio:
A's sacrifice= 3/5- 5/10= 1/10
B's sacrifice= 2/5- 3/10= 1/10
Sacrificing ratio= 1:1
2. Distribution of premium for goodwill:
A's share= 10000 * 1/2= 5000
B's share= 10000 * 1/2= 5000
Old ratio (A and B) = 3 : 2
C is admitted for 1/5 th share A's sacrifice in favour of
C = (1/5) x (1/2) = (1/10) B's sacrifice in favour of C = (1/5) x (1/2) = (1/10)
New ratio = Old ratio - Sacrificing ratio A's new ratio = (3/5) - (1/10) = 5/10 or
1/5 B's new share = (2/5) - (1/10) = 3/10 C's share = A's sacrifice + B's sacrifice
= (1/10) + (1/10)
= 2/10 Therefore,
new profit sharing ratio of A, B and C is 5 : 3 : 2