Question

X and Y are partners sharing profits and losses in the ratio of 3 : 2. They admit Z
1
into partnership with th share in profits which he acquires equally from X and Y.
Z brings in 40,000 as goodwill in cash. Goodwill amount will be credited to:​

Answer 1

ANSWER :

✪ X' Capital Account and Y's Capital Account.

• ➲ X and Y are partners sharing profits and losses in the ratio of 3 : 2 and they admit Z into partnership with th share in profits which he acquires equally from X and Y. If Z brings in 40,000 as goodwill in cash; then Goodwill amount will be credited to : X' Capital Account and Y's Capital Account in their sacrificing ratio.

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EXPLANTION :

• ✎ When a new partner is admitted in a partnership firm, the existing old partners suffer loss in terms of share of profit. The ratio of loss suffered by old partners may be in the old profit sharing ratio or in some other ratio. The difference between what one was getting earlier and what he is getting now is known as Sacrifice. When the individual sacrifice of two or more partners is expressed in terms of ratio, it is termed as 'Sacrificing Ratio'.

In this question, it is given that,

• ➻ X and Y are partners sharing profits and losses in the ratio of 3 : 2 and they admit Z into partnership with th share in profits which he acquires equally from X and Y.

• ➻ Z brings in 40,000 as goodwill in cash.

Hence,

• ➻ The sacrificing ratio of X and Y is 1 : 1.

Therefore,

• ➻ Amount of goodwill Rs. 40,000 brought in cash by Z will be credited to X's Capital Account and Y's Capital Account in their Sacrificing Ratio, i.e, 1 : 1.

Now,

• ★ Amount of goodwill credited to X's Capital Account = Rs. 40,000 × $\sf{\dfrac{1}{2}}$

➜ Amount of goodwill credited to X's Capital Account = Rs. 20,000.

And,

• ★ Amount of goodwill credited to Y's Capital Account = Rs. 40,000 × $\sf{\dfrac{1}{2}}$

➜ Amount of goodwill credited to Y's Capital Account = Rs. 20,000.