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Question
Arti and Bharti are partners in a firm sharing profits in 3:2 ratio, They admitted Sarthi for 1/4 share in the profits of the firm. Sarthi brings Rs. 50,000 for his capital and Rs. 10,000 for his 1/4 share of goodwill. Goodwill already appears in the books of Arti and Bharti at Rs. 5,000. the new profit sharing ratio between Arti, Bharti and Sarthi will be 2:1:1. Record the necessary journal entries in the books of the new firm?
Solution
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Journal Entries |
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Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
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Arti's Capital A/c |
Dr. |
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3,000 |
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Bharti's Capital A/c |
Dr. |
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2,000 |
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To Goodwill A/c |
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5,000 |
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(Goodwill written off) |
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Cash A/c |
Dr. |
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60,000 |
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To Sarthi's Capital A/c |
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50,000 |
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To Premium for Goodwill A/c |
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10,000 |
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(Amount of capital and share of goodwill brought by Sarthi) |
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Premium for Goodwill A/c |
Dr. |
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10,000 |
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To Arti's Capital A/c |
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4,000 |
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To Bharti’s Capital A/c |
6,000 |
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(Premium for Goodwill credited Arti's Capital Account) |
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Old Ratio = Arti : Bharti
= 3 : 2
Sarthi admitted for ` 1/4` share in new firm.
New Ratio = Arti : Bharti : Sarthi
= 2 : 1 : 1
Sacrificing Ratio = Old Ratio − New Ratio
Arti = `3/5 - 2/4 = 2/20`
Bharti = `2/5 - 1/4 = 3/20`
Arti will receive = 10,000 x `2/5` = 4,000
Bharti will receive = 10,000 x `3/5` = 6,000.
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Balance Sheet of A and B as on March 31, 2016 |
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Liabilites |
Amount (Rs) |
Assets |
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Sundry creditors |
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Liabilites |
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||
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Creditors |
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900 |
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Chetan |
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43,000 |
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55,000 |
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55,000 |
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