Verma and Sharma are partners in a firm sharing profits and losses in the ratio of 5 : 3. They admitted Ghosh as a new partner for 1/5th share of profits. Ghosh is to bring in ₹ 20,000 as capital and ₹ 4,000 as his share of goodwill premium. Give the necessary journal entries:
(a) When the amount of goodwill is retained in the business.
(b) When the amount of goodwill is fully withdrawn.
(c) When 50% of the amount of goodwill is withdrawn.
(d) When goodwill is paid privately.
Answers
Explanation:
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Solution:
Journal Entries
S.No. Particulars Debit Rs. Credit Rs.
Case (a) Cash A/c Dr. 24,000
To G's Capital A/c 20,000
To Premium for Goodwill A/c 4,000
Premium for Goodwill A/c Dr. 4,000
To V's Capital A/c 2,500
To Sharma's Capital A/c 1,500
Case (b) Cash A/c Dr. 24.000
To G's Capital A/c 20,000
To Premium for Goodwill A/c 4,000
Premium for Goodwill A/c Dr. 4,000
To V's Capital A/c 2,500
To Sharma's Capital A/c 1,500
Sharma's Capital A/c Dr. 1,500
To Cash A/c 4,000
Case (c) Cash A/c Dr. 24,000
To G's Capital A/c 20,000
To Premium for Goodwill A/c 4,000
Premium for Goodwill A/c Dr. 4,000
To V's Capital A/c 2,500
To Sharma's Capital A/c 1,500
V's Capital A/c Dr. 1,250
Sharma's Capital A/c 750
To Cash A/c 2,000
(Half of the amount of premium for goodwill withdrawn by Old partners)
Case (d) No entry: Goodwill was not brought into Firm