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Question 35 Chapter 5 of +2-A
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35. A and B are partners sharing profits and losses in the ratio of 3: 2. They admit C as a partner in the firm for 1/4th share in profits which he takes 1/6th from A and 1/12th from B. C brings in only 60% of his share of the firm’s goodwill. Goodwill of the firm has been valued at 1,00,000. Pass necessary journal entries to record this arrangement.
The solution of Question 35 Chapter 5 of +2-A: –
| Date | Particulars | L.F. | Debit | Credit | |
| Bank A/c | Dr | 15,000 | |||
| To Premium for Goodwill A/c | 15,000 | ||||
| (Being C brought his share of capital and goodwill) | |||||
| premium for Goodwill A/c | Dr | 15,000 | |||
| C’s Capital A/c | Dr | 10,000 | |||
| To A’s Capital A/c | 16,667 | ||||
| To B’s Capital A/c | 8,333 | ||||
| (Being goodwill brought by C distributed among the old partners and balance amount of goodwill adjusted with C’s Capital a/c) | |||||
Working Note: –
Old Ratio of A and B = 3:2
| C get his share from the A | = | 1 |
| 6 | ||
| = | 2 | |
| 12 |
| C get his share from the B | = | 1 |
| 12 |
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| Sacrificing Ratio of X and Y | = | 2: 1 |
Firm’s Share of Goodwill = 1,00,000
| C’s Share of Goodwill | = | Firm’s Goodwill x | C’s share |
| = | 10,000 | X | 1 | |
| 4 | ||||
| = | 25,000 |
B will get a share of Goodwill | = | C’s Goodwill X | Sacrifice share of B |
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| Share of Goodwill received in cash | = | 25,000 | X | 60 |
| 100 | ||||
| = | 15,000 |
C’s Share of Goodwill = 25,000
Sacrificing Ratio of X and Y = 2:1
| A will get a share of Goodwill | = | C’s Goodwill x | Sacrifice share of A |
| = | 25,000 | X | 2 | |
| 3 | ||||
| = | 16,667 |
| B will get a share of Goodwill | = | C’s Goodwill x | Sacrifice share of B |
| = | 25,000 | X | 1 | |
| 3 | ||||
| = | 8,337 |
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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