A and B are partners sharing profits in the ratio of 3:2 . They admit C into the partnership with 1/4th share in future profits. The new profit. The new profit sharing ratio is 5 : 4 : 3. C brings into the business Rs.50,000 for his capital but could not brings any amount for goodwill. The firm's goodwill on C's admission was valued at Rs.48,000 . Pass journal entries.

Explanation

(a) When Goodwill is adjusted through new Partner's Current Account :

Notes :
(1) Value of total goodwill of the firm = Rs. 48,000
C's share of goodwill = ` 48,000 xx 1/4 = Rs. 12,000`.
(2) Calculation of Sacrificing Ratio :
Sacrifice Ratio = Old Ratio - New Ratio
` A = 3/5 - 5/12 = (36-25)/60 = 11/60`
` B = 2/5 - 4/12 = (24-20)/60 = 4/60`
Thus, Sacrifice Ratio = ` 11/60 : 4/60 or 11 : 4`
ALTERNATE SOLUTION : ltBRgt (B) When Goodwill is raised and written off :