Question 29 Chapter 5 of +2-A
Table of Contents
29. A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. They admit C into partnership for 1/5th share. C brings 30,000 as capital and 10,000 as goodwill. At the time of admission of C, goodwill appeared in the Balance Sheet of A and B at 3,000. New profit-sharing ratio of the partners will be 5 : 3 : 2. Pass necessary Journal entries.
The solution of Question 29 Chapter 6 of +2-A
| Date | Particulars |
L.F. | Debit | Credit | |
| A’s Capital A/c | Dr | 1,800 | |||
| B’s Capital A/c | Dr | 1,200 | |||
| To Goodwill A/c | 3,000 | ||||
| (Being goodwill written off which is already in the books) | |||||
| Bank A/c | Dr | 40,000 | |||
| To C’s Capital A/c | 30,000 | ||||
| To Premium for Goodwill A/c | 10,000 | ||||
| (Being C brought his share of capital and goodwill) | |||||
| Premium for Goodwill A/c | Dr | 10,000 | |||
| To A’s Capital A/c | 5,000 | ||||
| To B’s Capital A/c | 5,000 | ||||
| (Being goodwill distributed among the old partners’ in their sacrificing ratio) | |||||
| Old Ratio of A and B | = | 3 : 2 |
| New Ratio of A, B, and C | = | 5 : 3 : 2 |
Sacrificing Share = Old Ratio – New Ratio
| A’s Sacrificing Share | = | 3 | – | 5 |
| 5 | 10 |
| = | 6 – 5 | |
| 10 |
| = | 1 | Sacrifice |
|
| 10 |
| B’s Sacrificing Share | = | 2 | – | 3 |
| 5 | 10 |
| = | 4 – 3 | |
| 10 |
| = | (-1) | Gains | |
| 10 |
| Total Firm’s Goodwill | = | 3,000 |
| A’s share of Goodwill | = | 3,000 | X | 3 |
| 5 | ||||
| = | 1,800 |
| B’s share of Goodwill | = | 3,000 | X | 2 |
| 5 | ||||
| = | 1,200 |
Sacrifice Ratio = 1 : 1
Distribution of C’s share of Goodwill
Share of Goodwill = C’s Goodwill X Partners’ Sacrifice share
| A’s and B’s Share of Goodwill | = | 10,000 | X | 1 |
| 2 | ||||
| = | 5,000 |
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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