Q.No.23 | Chapter 5 – Admission of Partner | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Question 23 Chapter 5 of +2-A

23. B and C are in partnership sharing profits and losses as 3 : 1. They admit D into the firm, D pays premium of 15,000 for 1/3rd share of the profits. As between themselves, B and C agree to share future profits and losses equally. Draft Journal entries showing appropriations of the premium money.

 

The solution of Question 23 Chapter 6 of +2-A

 

Date	Particulars		L.F.	Debit	Credit
	Cash A/c	Dr		15,000
	To Premium for Goodwill A/c				15,000
	(Being C brought his share of goodwill)
	Premium for Goodwill A/c	Dr		15,000
	C’s Capital A/c	Dr		15,000
	To B’s Capital A/c				18,750
	(Being goodwill distributed among the old partners’ in their sacrificing ratio)

 

Old Ratio of B and C	=	3 : 1
D is admitted for 1/3th share of profit

Let the total share of the business = 1
Remaining share of B and C after D’s Admission = Total Share - D’s Share

Remaining share	=	1	-	1
				3

=	3 - 1
	3

=	2
		3

 

B and C each share of profit after D’s admission	=	2	X	1
		3		2

=	1
		3

Old Ratio of B and C	=	3 : 1
New Ratio of B, C, and D	=	1 : 1 : 1

Sacrificing Share = Old Ratio - New Ratio

B’s Sacrificing Share	=	3	-	1
		4		3

=	9 - 4
	12

=	5	Sacrifice
			12

 

C’s Sacrificing Share	=	1	-	1
		4		3

=	3 - 4
	12

=	(-1)	Gains
			12

 

Distribution of D’s share of Goodwill
D’s share of Goodwill = 15,000
C’s gaining the share in the firm’s profit so only B will received the share of goodwill brought by D and he will also receive the share of goodwill from C

Total Firm’s Goodwill	=	15,000	X	3
				1
	=	45,000

 

C’s Share of Goodwill

=

Firm’s Goodwill  X Gaining share of C’s

B’s get share of Goodwill	=	45,000	X	1
				12
	=	3,750

 

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

• Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
• Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
• Chapter No. 3 – Goodwill: Nature and Valuation
• Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
• Chapter No. 5 – Admission of a Partner
• Chapter No. 6 – Retirement/Death of a Partner
• Chapter No. 7 – Dissolution of a Partnership Firm

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 8 – Company Accounts –  Accounting for Share Capital
• Chapter No. 9 – Company Accounts – Issue of Debentures
• Chapter No. 10 – Redemption of Debentures

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 1 – Financial Statements of a Company
• Chapter No. 2 – Financial Statement Analysis 
• Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
• Chapter No. 4 – Accounting Ratios
• Chapter No. 5 – Cash Flow Statement

 

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