Question

TREATMENT OF GOODWILL
A and B are partners in a firm sharing profit ratio in the ratio 2 : 3. They admit C into partnership as a partner with 1/6th share in profits who brought Rs.70,000 as capital and Rs. 10,000 as his share of goodwill. The new profit sharing ratio agreed to be 3 : 2 : 1. Record these transactions in journal of firm.

Answer 1

Explanation:

the time of admission of a new partner good will brought in new partner is distributed among old partner in their old ratio

good will brought in by new partner =total good will of firm *c's share of profit

good will be brought in by new partner=RS 9600*(1/4)= RS. 2400

good will brought by c on his admission is distributed among a and b in their old ratio i.e. 3:2

amount with drawn by-

A = RS 2400 *(3/5)= 1440

B = Rs 2400*(2/5)=960

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Answer 2

old PSR 2 :3

new PSR 3:2:1

Sacrifice share = old - new share

sacrifice share of A = 2/3-3/6 = 1

sacrifice share of B = 1/3-2/6 = 0

C share of Goodwill = 10000

journal

• cash a/c Dr. 70000

to C's capital a/c 70000

• cash a/c Dr. 10000

to premium for Goodwill a/c 10000

• premium for Goodwill a/c Dr 10000

to A's capital a/c 10000

since B is not sacrificing he will not get any premium

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