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Question
A and B were partners in a firm sharing profits and losses in the ratio of 3 : 2. They admitted C as a new partner for 3/7th share in the profit and the new profit-sharing ratio will be 2 : 2 : 3. C brought ₹ 2,00,000 as his capital and ₹ 1,50,000 as premium for goodwill. Half of their share of premium was withdrawn by A and B from the firm. Calculate sacrificing ratio and pass necessary Journal entries for the above transactions in the books of the firm.
Solution
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Journal |
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Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
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Cash A/c |
Dr. |
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3,50,000 |
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To C’s Capital A/c |
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2,00,000 |
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To Premium for Goodwill A/c |
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1,50,000 |
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(C brought capital and Premium for Goodwill) |
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Premium for Goodwill A/c |
Dr. |
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1,50,000 |
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To A’s Capital A/c |
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1,10,000 |
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To B’s Capital A/c |
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40,000 |
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(Premium for Goodwill distributed) |
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A’s Capital A/c |
Dr. |
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55,000 |
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B’s Capital A/c |
Dr. |
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20,000 |
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To Cash A/c |
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75,000 |
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(Half of the goodwill withdrawn by A and B) |
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Calculation of Sacrificing Ratio :
Sacrificing Ratio = Old Ratio - New Ratio
A's = `3/5 - 2/7` = `11/35`
B's = `2/5 - 2/7 = 4/35`
Sacrificing Ratio = `11/35 : 4/35` = 11 : 4
Working Notes-
WN1 : Distribution of Premium for Goodwill
A will get = 1,50,000 x `11/15` = Rs. 1,10,000
B will get = 1,50,000 x `4/15` = Rs. 40,000
WN2 : Amount of Premium for Goodwill withdrawn
A will withdrawn = 1,10,000 x `1/2` = Rs. 55,000
B will withdrawn = 40,000 x `1/2` = Rs. 20,000.
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