Question

A and B are partners sharing profits in the ratio of 2 : 1. They admit C for 1/4th share in profits. C brings in ₹ 30,000 for his capital and ₹ 8,000 out of his share of ₹ 10,000 for goodwill. Before admission, goodwill appeared in books at ₹ 18,000. Give Journal entries to give effect to the above arrangement.

Answer 1

Answer 34:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	A’s Capital A/c	Dr.		12,000
	B’s Capital A/c	Dr.		6,000
	To Goodwill A/c				18,000
	(Goodwill written-off)
	Cash A/c	Dr.		38,000
	To C’s Capital A/c				30,000
	To Premium for Goodwill				8,000
	(C brought Capital and goodwill)
	Premium for Goodwill A/c	Dr.		8,000
	C’s Capital A/c	Dr.		2,000
	To A’s Capital A/c				6,667
	To B’s Capital				3,333
	(C’s share of goodwill distributed between A and B in Sacrificing Ratio)

Working Notes:
WN1 : Writing-off of Goodwill
A’s Capital Account will be debited by = 18,000 x `2/3` = Rs. 12,000.

B’s Capital Account will be debited by = 18,000 x `1/3` = Rs. 6,000.

WN2 : Distribution of C’s share of Goodwill
A will get = 10,000 x `2/3` = Rs. 6,667

B will get = 10,000 x `1/3` = Rs. 3,333.