X,Y and Z are partners in a firm sharing profits and losses in the ratio of 3:1. they admit z as partners for 1/5th share of future profits of the firm. z introduces rupees 40,000,out of which rupees 20,000 is towards goodwill of the firm. you are asked to journalise the above transactions in the books of the firm.
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X,Y and Z are partners in a firm sharing profits and losses in the ratio of 3:1. they admit z as partners for 1/5th share of future profits of the firm. z introduces rupees 40,000,out of which rupees 20,000 is towards goodwill of the firm. you are asked to journalise the above transactions in the books of the firm.
Explanation:
The Premium for the goodwill is the additional amount brought in by the incoming partner which will compensate the existing partners for their sacrifice in the profits of the firm. Because , Z acquires his entire share from Y, only Y is to be compensated for the loss and it is not to be distributed equally among the partners.Therefore, the entire amount of premium is credited to Y's Capital account
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