A and B are partners sharings sharing profits in the ratio of 3 : 2. They admit C into the firm for 1/4th share in profit which he takes 1/6th from A and 1/12th from B . C brings Rs. 90,000 as goodwill out of his share of Rs. 1,20,000. No goodwill account appears in the books of the firm. Pass necessary journal entries to record this arrangement.

Explanation

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

ALTERNATE SOLUTION :
(b) When Goodwill is raised and written off :

Working Notes :
(1) C brings Rs. 90,000 as goodwill out of his share of Rs.1,20,000. Hence, goodwill be raised based on the portion of goodwill not brought by the new partner.
` 30,000 xx 4/1 = Rs. 1,20 ,000`
(2) Calculation of New Profit Sharing Ratio :
A's new share = `3/5 - 1/6 = (18-5)/30 = 13/30`
B's new share = `2/5 - 1/12 = (24-5)/60 = 19/60`
C's share = ` 1/4`
Thus new ratio = `13/30 : 19/60 : 1/4 or 26 : 19 : 15`