(When New or Incoming Partner brings a Part of his Share of Goodwill).
X and Y are partners sharing profits and losses in the ratio of 3 : 2. They agree to admit Z as a partner for 1/5th share. Z acquires his share from X and Y in the ratio of 2 : 3. Goodwill of the firm is valued at RS 50,000. Z brings in only 60% of his share of goodwill and RS 2,00,000 as his capital through cheque.
Pass necessary Journal entries under each of the following alternative cases:
Case 1. When goodwill does not appear in the books.
Case 2. When goodwill appears in the books at RS 20,000.

Explanation

Nots: Z bring only RS 6,000 as goodwill out of his total share of RS 10,000 (i.e.,1/5th of RS 50,000). So dificiency of RS 4,000 (i.e., RS 10,000-RS 6,000) will be met out of his capital or Current Account.