Ram and Rahim are partners in a firm sharing profits and losses in the ratio of 3:2. Rahul is admitted into partnership for 1/3 share in profits. He brings in Rs. 10,000 as capital, but is not in a position to bring any amount for his share of goodwill which has been valued at Rs. 30,000. Give necessary journal entries under each of the following situations:
(a) When there is no goodwill appearing in the books of th 2
(b) When the goodwill appears at Rs 15,000 in the book the firm.
Answers
(A)Journal entries in 1st condition:
-First Entry for cash:
Cash A/c Dr. 10,000
To Rahul's capital A/c 10,000
( cash brought by new partner)
-Second entry for Goodwill 30,000
Goodwill A/c Dr. 30,000
To Rahim's capital A/c 18,000
To Ram's capital A/c 12,000
(Goodwill has been raised)
Working note:-
30,000×3÷5=18,000
30,000×2÷5=12,000
(B)Journal entries in 2nd condition:
-First Entry for cash:
Cash A/c Dr. 10,000
To Rahul's capital A/c 10,000
(cash brought by new partner)
-Second entry for Goodwill 15000
Goodwill A/c Dr. 15,000
To Rahim's capital A/c 9,000
To Ram's capital A/c 6,000
(Goodwill brought in by new partner)
Working note:
15,000×3÷5=9,000
15,000×2÷5=6,000