Question 22 Chapter 5 of +2-A
Table of Contents
22. Give Journal entries to record the following arrangements in the books of the firm:
- B and C are partners sharing profits in the ratio of 3 : 2. D is admitted paying a premium (goodwill) of 2,000 for 1/4th share of the profits, shares of B and C remain as before.
- B and C are partners sharing profits in the ratio of 3 : 2. D is admitted paying a premium of 2,100 for 1/4th share of profits which he acquires 1/6th from B and 1/12th from C.
The solution of Question 22 Chapter 6 of +2-A
Case A
| Date | Particulars |
L.F. | Debit | Credit | |
| Cash A/c | Dr | 2,000 | |||
| To Premium for Goodwill A/c | 2,000 | ||||
| (Being C brought his share of goodwill) | |||||
| Premium for Goodwill A/c | Dr | 2,000 | |||
| To B’s Capital A/c | 1,200 | ||||
| To C’s Capital A/c | 800 | ||||
| (Being goodwill distributed among the old partners’ in their sacrificing ratio) | |||||
Working Note: –
Distribution of C’s share of Goodwill
C’s share of Goodwill = 2,000
| A’s get share of Goodwill | = | 2,000 | X | 3 |
| 5 | ||||
| = | 1,200 |
| B’s get share of Goodwill | = | 2,000 | X | 2 |
| 5 | ||||
| = | 800 |
Case B
| Date | Particulars |
L.F. | Debit | Credit | |
| Cash A/c | Dr | 2,100 | |||
| To Premium for Goodwill A/c | 2,100 | ||||
| (Being C brought his share of goodwill) | |||||
| Premium for Goodwill A/c | Dr | 2,100 | |||
| To B’s Capital A/c | 1,400 | ||||
| To C’s Capital A/c | 700 | ||||
| (Being goodwill distributed among the old partners’ in their sacrificing ratio) | |||||
Working Note: –
| Sacrificing Ratio of A and B | = | 1 | : | 1 |
| 6 | 12 |
| = | 2 | : | 1 | |
| 12 | 12 | |||
| = | 2 | : | 1 |
Distribution of C’s share of Goodwill
C’s share of Goodwill = 2,100
| A’s get share of Goodwill | = | 2,100 | X | 2 |
| 3 | ||||
| = | 1,400 |
| B’s get share of Goodwill | = | 2,100 | X | 1 |
| 3 | ||||
| = | 700 |
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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