Required
Ashoo and Rahul are partners sharing profits in the ratio of 5:3. Gaurav was
Admitted for 1/5 share and was asked to contribute proportionate capital and
Rs. 4.000 for premium (goodwill). The Capitals of Ashoo and Rahul, after all
adjustments relating to revaluation, goodwill etc., worked out to be Rs. 45,000
and Rs. 35,000 respectively.
Required: Calculate New Profit sharing ratio, capital to be brought in by Gaurav
and record necessary journal entries for the same.
Answers
A journal entry is a business transaction in the financial books of a business
- Journal entries will be -
Cash A/c Dr. 24,000
To Premium for Goodwill A/c 4,000
To Gaurav's Capital A/c 20,000
(Being Gaurav brought share of capital and goodwill)
Premium for Goodwill A/c Dr 4,000
To Ashoo A/c 2,500
To RAhul A/c 1,500
(Being sacrificing partners compensated with share of goodwill)
Working Notes
Old Ratio of Ashoo and Rahul = 5:3
Gaurav's Share = 1/5
Thus, the remaining Share = 1 - 1/5 = 4/5
Ashoo's New Share = 4/5 x 5/8
= 20/40 = 1/2
Rahul's New Share = 4/5 x 3/8
= 12/40 = 3/10
Hence, the new profit sharing ratio = 5:3:2
Combined capital of Ashoo and Rahul for 4/5th share
= 45000 + 35000
= 80000
Firm's Capital = 80000 x 5/4
= 1,00,000
Gaurav's Share of Capital
= 100000 x 1/5
= 20,000