Question 21:
B
and C
are in partnership sharing profits and losses as 3 :
1. They admit D into the firm, D pays premium of ` 15,000 for 1/3rd share of the profits. As between
themselves, B and C agree to share future profits and losses
equally. Draft Journal entries showing appropriations of the premium money.
Answer:
Journal 

Date 
Particulars 
L.F. 
Debit ` 
Credit ` 








Cash A/c 
Dr. 

15,000 


To Premium for Goodwill A/c 



15,000 

(D brought his share of goodwill in cash) 











Premium for Goodwill A/c 
Dr. 

15,000 


To B’s Capital A/c 



15,000 

(Premium for goodwill transferred to B’s Capital) 











C’s Capital A/c 
Dr. 

3,750 


To B’s Capital A/c 



3,750 

(Goodwill charged from C’s
Capital Account due 










WN1
Calculation of Sacrificing Ratio:
Let combined share of all partners after D’s admission be = 1
Combined share of B and C after C’s admission be = 1
=11/3
=2/3
B and C each share of profit after D’s admission will be
=2/3×1/2 
=2/6 =1/3
each 
Sacrificing
Ratio =Old ratio new ratio
A’s 
=3/41/3 

=5/12 (Sacrifice) 
B’s 
=1/41/3 

=1/12(gain) 
WN2
C is gaining in new the firm. Hence, C’s gain in goodwill will be
debited to his capital and given to B (sacrificing partner).
Goodwill of the firm= premium of Goodwill brought by D × reciprocal of D’s share
=15,000×3/1=45,000
C’s share of gain in goodwill= goodwill of the firm × C’s share of gain
=45,000×1/12=3,750
Question 22:
Geeta and Sunita
are partners in a firm sharing profits in the ratio of 3 :
2. They admit Anita
as a new partner. The new profitsharing ratio between Geeta, Sunita and Anita
will be 5 : 3 : 2. Anita brought in
`25,000
for his share of premium for goodwill. Pass necessary Journal entries for the
treatment of goodwill.
Answer:
Journal 

Date 
Particulars 
L.F. 
Debit ` 
Credit ` 








Cash A/c 
Dr. 

25,000 


To Premium for Goodwill A/c 



25,000 

(Anita brought his share of goodwill in cash) 











Premium for Goodwill A/c 
Dr. 

25,000 


To Geeta’s Capital A/c 



12,500 

To Sunita’s Capital A/c 



12,500 

(Ania’s share of Goodwill distributed in Geeta and Sunita in their sacrificing Ratio) 










Working Notes:
WN1
Calculating of Sacrificing Ratio
Sacrificing
Ratio =Old ratio new ratio

Geeta’s 
=3/55/10 




=1/10 



Sunita’s 
=2/53/10 




=1/10 



Geeta 

Sunita 

Sacri ficing Ratio = 
1/10 
: 
1/10 


1 

1 

WN2
Distribution of Geeta’s share of Goodwill
Geeta and Sunita each will get =25,000×1/2=12,500
Question 23:
A and B are in
partnership sharing profits and losses in the ratio of 5 :
3. C is admitted as a partner who pays ` 40,000 as capital and the necessary amount of goodwill
which is valued at ` 60,000 for the firm. His share of profits will be 1/5th
which he takes 1/10th from A and 1/10th from B.
Pass Journal entries and also calculate future profitsharing ratio of the
partners.
Answer:
Journal 

Date 
Particulars 
L.F. 
Debit ` 
Credit ` 


Cash A/c 
Dr. 

52,000 


To C’s Capital A/c 



40,000 

To Premium for Goodwill A/c 



12,000 

(C brought Capital and his share of goodwill in cash) 











Premium for Goodwill A/c 
Dr. 

12,000 


To A’s Capital A/c 



6,000 

To B’s Capital A/c 



6,000 

(C’s share of Goodwill distributed in A and B) 










Working Notes
WN1

A 

B 
Sacrificing Ratio = 
1/10 
: 
1/10 

1 

1 
WN2
Calculation of new profit sharing Ratio

A 
B 
OLD RATION 
5 : 
3 
New
ratio= old ratio – sacrificing ratio

A’s 
=5/81/10 




=21/40 



B’s 
=3/81/10 




=11/40 



X 

Y 

Z 

New profit sharing ratio = 
21/40 
: 
11/40 
: 
1/5 

= 
21/40 
: 
11/40 
: 
8/40 

WN3
Distribution of C’s share of Goodwill (in Sacrificing Ratio)
A and B each will get =12,000×1/2=6,000
Question 24:
Adil and Bhavya are partners
sharing profits and losses in the ratio of 7 : 5. They
admit Cris, their Manager, into partnership
who is to get 1/6th share in the business. Cris
brings in ` 1,00,000 for his capital
and ` 36,000 for the 1/6th share of goodwill which he acquires
1/24th from Adil and 1/8th from Bhavya. Profits for the first year of the new
partnership was ` 2,40,000. Pass necessary Journal
entries for Cris's admission and
apportion the profit between the partners.
Answer:
Journal 

Date 
Particulars 
L.F. 
Debit ` 
Credit ` 








Cash A/c 
Dr. 

1,36,000 


To Cris’s Capital A/c 



1,00,000 

To Premium for Goodwill A/c 



36,000 

(Cris brought capital and his share of goodwill) 











Premium for Goodwill A/c 
Dr. 

36,000 


To Adil’s Capital A/c 



9,000 

To Bhavya’s Capital A/c 



27,000 

(Cris’s share of goodwill transferred to Adil and Bhavya in their sacrificing ratio i.e. 3:1) 











Profit and Loss Appropriation A/c 
Dr. 

2,40,000 


To Adil’s Capital A/c 



1,30,000 

To Bhavya’s Capital A/c 



70,000 

To Cris’s Capital A/c 



40,000 

(Profit after Cris’s admission distributed) 










Working Note:
WN1

Adil 

Bhavya 
Sacrificing Ratio = 
1/24 
: 
1/8 

1 
: 
3 
WN2
Distribution of Cris’s share of Goodwill (in sacrificing ratio)
Adil will get =3,600×1/4=900
Bhavya will get =3,600×3/4=2,700
WN3
Calculation of New Profit Sharing Ratio
New
ratio= old ratio – Sacrificing Ratio

Adil’s 
=7/121/24 




=13/24 



Bhavya’s 
=5/121/8 




=7/24 



Adil 

Bhavya 

Cris 

New profit sharing ratio= 
13/24 
: 
7/24 
: 
1/6 

= 
13/24 
: 
7/24 
: 
4/24 

= 
13 
: 
7 
: 
4 

WN4
Distribution of Profit earned after Cris’s admission (in new ratio)
Adil will get =2,40,000×13/24=1,30,000
Bhavya will get =2,40,000×7/24=70,000
Cris will get =2,40,000×4/24=40,000
Question 25:
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 profitsharing ratio of the partners will be 5 : 3 : 2. Pass necessary Journal entries.
Answer:
Journal Entries 

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 

(Goodwill writtenoff) 











Cash A/c 
Dr. 

40,000 


To C’s Capital A/c 
Dr. 


30,000 

To Premium for Goodwill A/c 



10,000 

(C brought capital and his share of goodwill in cash) 











Premium for Goodwill 
Dr. 

10,000 


To A’s Capital A/c 



5,000 

To B’s Capital A/c 



5,000 

(Premium for Goodwill distributed) 











A 
B 
C 
OLD RATION 
3 : 
2 : 
1 
NEW RATIO 
5 : 
3 : 
2 
Sacrificing Ratio = Old Ratio − New Ratio

A’s 
=3/55/10 




=1/10 



B’s 
=2/53/10 




=1/10 



X 

Y 

Sacrificing Ratio = 
1/10 
: 
1/10 

= 
1 
: 
1 

Distribution of Premium for Goodwill C’s share of Goodwill)
A and B each will get =10,000×1/2=5,000
Goodwill writtenoff
A’s capital will be debited =3,000×3/5=1,800
B’s
capital will be credited =3,000×2/5=1,200
Ts Grewal Solution 20232024
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Class 12 / Volume – I