X and Y are partners in a firm sharing profits and losses in 4:3 ratio.

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Q.21.X and Y are partners in a firm sharing profits and losses in 4:3 ratio. They admitted Z for 1/8 share. Z brought Rs. 20,000 for his capital and Rs. 7,000 for his 1/8 share of goodwill. Subsequently X, Y and Z decided to show goodwill in their books at Rs. 40,000. Show necessary journal entries in the books of X, Y and Z?

SOLUTION

Journal


DateParticularsL.FAmount(Dr.)Amount(Cr.)
Cash A/cDr.27,000
  To Z’s capital A/c20,000
  To Premium for Goodwill A/c7,000
(New partner z brought his share of goodwill and premium into the business)
Premium for Goodwill A/cDr.7,000
  To x’s capital A/c4,000
  To y’s capital A/c3,000
(Premium for goodwill credited to old partner in their sacrificing ratio)


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