# Commerce Accountancy Chapter 5 - Admission Of A Partner

#### Question 41:

Asin and Shreyas are partners in a firm. They admit Ajay as a new partner with 1/5th share in the profits of the firm. Ajay brings    ` 5,00,000 as his share of capital. The value of the total assets of the firm was    ` 15,00,000 and outside liabilities were valued at    ` 5,00,000 on that date. Give necessary Journal entry to record goodwill at the time of Ajay's admission. Also show your workings.

 Journal Date Particulars L.F. Debit Amount    ` Credit Amount    ` Ajay’s Capital A/c Dr. 2,00,000 To Asin’s Capital A/c 1,00,000 To Shreya’s Capital A/c 1,00,000 (Ajay’s share of goodwill distributed among the old partners in their sacrificing ratio 1:1.)

Working Notes:

Calculation of Goodwill brought in by Ajay

 Value of firm’s goodwill = Capitalised value of the firm – Net worth Capitalised value of the firm = Share of Ajay's capital × Reciprocal of Ajay's share = 5,00,000 ×5/1=   ` 25,00,000 Net worth of the new firm = Total assets-Outside liabilities + Ajay's capital = 15,00,000 - 5,00,000 + 5,00,000=    ` 15,00,000 Value of firm's goodwill = Capitalised value of firm - Net worth of the new firm =25,00,000 - 15,00,000  =    ` 10,00,000 Ajay's share of goodwill = 10,00,000 × 1/5 =   ` 2,00,000

#### Question 42:

Disha and Divya are partners in a firm sharing profits in the ratio of 3 : 2 respectively. The fixed capital of Disha is `4,80,000 and of Divya is `3,00,000. On 1st April, 2021 they admitted Hina as a new partner for 1/5th share in future profits. Hina brought `3,00,000 as her capital. Calculate value of goodwill of the firm and record necessary Journal entries on Hina's admission. (Delhi 2013 C, Modified)

 Journal Date Particulars L.F. Debit Amount  ` Credit Amount  ` 2021 April 1 Bank A/c Dr. 3,00,000 To Hina’s Capital A/c 3,00,000 (Capital brought in by Hina) April 1 Hina’s Current A/c Dr. 84,000 To Disha’s Current A/c 50,400 To Divya’s Current A/c 33,600 (Hina’s Share of Goodwill adjusted through current accounts)

Working Note:

Calculation of Hidden Goodwill

 Total capital of the firm on the basis of Hina’s capital=(3,00,000×5/1)= 15,00,000 Less- adjusted cpital of partners + new partner’s capital= (10,80,000) 4,20,000

Hina’s share of goodwill=4,20,000×1/5=84,000

#### Question 43:

E and F were partners in a firm sharing profits in the ratio of 3 : 1. They admitted G as a new partner on 1st April, 2021 for 1/3rd share. It was decided that E, F and G will share future profits equally. G brought    ` 50,000 in cash and machinery valued at    ` 70,000 as premium for goodwill.
Pass necessary Journal entries in the books of the firm.

 Journal Date Particulars L.F. Debit Amount  ` Credit Amount  ` 2021 April 1 Cash A/c Dr. 50,000 Machinery A/c Dr. 70,000 To Premium for Goodwill A/c 1,20,000 (G brought cash    ` 50,000 and Machinery    ` 70,000 for his share of Goodwill) April 1 Premium for Goodwill A/c Dr. 1,20,000 To E’s Capital A/c 1,20,000 (G share of goodwill transferred to E’s Capital Account) April 1 F’s Capital A/c Dr. 30,000 To E’s Capital A/c 30,000 (F’s share of gain in goodwill charged from his capital and transferred to E’s capital)

Working Notes:

WN1

 E F G OLD RATION 3  : 1: NEW RATIO 1  : 1  : 1 :

Sacrificing Ratio =Old ratio- new ratio

 E’s =3/4-1/3 =5/12 F’s =1/4-1/3 = -1/12

WN2

Calculation of F’s share of gain in goodwill

G’s share of Goodwill = 50,000 + 70,000 =    ` 1, 20,000

Goodwill of the firm on the basis of G’s share =120000×3/1=3,60,000

F’s share of gain in goodwill =3,60,000×1/12=30,000

#### Question 44:

Verma and Sharma are partners in a firm sharing profits and losses in the ratio of 5 : 3. They admitted Ghosh as a new partner for 1/5th share of profits. Ghosh is to bring in    ` 20,000 as capital and    ` 4,000 as his share of goodwill premium. Give the necessary Journal entries:
(a) When the amount of goodwill is retained in the business.
(b) When the amount of goodwill is fully withdrawn.
(c) When 50% of the amount of goodwill is withdrawn.
(d) When goodwill is paid privately.

 Journal Entries S.No. Particulars L.F. Debit Amount    ` Credit Amount    ` Case (a) Cash A/c Dr. 24,000 To Ghosh's Capital A/c 20,000 To Premium for Goodwill A/c 4,000 (Capital and Goodwill his share brought by Ghosh) Premium for Goodwill A/c Dr. 4,000 To Verma's Capital A/c 2,500 To Sharma's Capital A/c 1,500 (Goodwill brought by Ghosh credited to Old Partners in Sacrificing ratio) Case (b) Cash A/c Dr. 24,000 To Ghosh Capital A/c 20,000 To Premium for Goodwill A/c 4,000 (Capital and Goodwill brought by Ghosh for (1/5)share of profit) Premium for Goodwill A/c Dr. 4,000 To Verma's Capital A/c 2,500 To Sharma's Capital A/c 1,500 (Goodwill brought by Ghosh credited in Old Partner in Sacrificing Ratio) Verma's Capital A/c Dr. 2,500 Sharma's Capital A/c Dr. 1,500 To Cash A/c 4,000 (Amount of Premium for Goodwill withdrawn by Old Partners) Case (c) Cash A/c Dr. 24,000 To Ghosh's Capital A/c 20,000 To Premium for Goodwill A/c 4,000 (Capital and Goodwill brought by Ghosh for (1/5)share of profit) Premium for Goodwill A/c Dr. 4,000 To Verma's Capital A/c 2,500 To Sharma's Capital A/c 1,500 (Premium for Goodwill credited to Old Partner's Capital Account in sacrificing ratio) Verma's Capital A/c Dr. 1,250 Sharma's Capital A/c 750 To Cash A/c 2,000 (Half of the amount of premium for goodwill withdrawn by Old partners) Case (d) No entry: Goodwill was not brought into firm

#### Page No 5.90:

Question 45: Aman commenced business with a capital of  `2,50,000 on 1st April, 2016. During the five years ended

31st March, 2021, the following profits and losses were made

31st March, 2017-Loss `5,000

31st March, 2018-Profit `13,000

31st March, 2019-Profit `17,000

31st March, 2020-Profit `20,000

31st March, 2021-Profit `25,000

During this period he had drawn `40,000 for his personal use. On 1st April, 2021, he admitted Boman into partnership on the following terms:

Boman to bring for his half share in the business, capital equal to Aman's Capital on 31st March, 2021and to pay for the one-half share of goodwill of the business, on the basis of three times the average profit of the last five years. Prepare the statement showing what amount Boman should invest to become a partner and pass entries to record the transactions relating to admission.

 Journal Date Particulars L.F. Debit Amount    ` Credit Amount    ` Cash A/c Dr. 3,01,000 To Boman’s capital A/c To Premium for Goodwill A/c 2.80,000 21,000 (Being Boman’s brought his share of goodwill and capital in cash) Premium for Goodwill A/c Dr. 21,000 To Aman’s Capital A/c 21,000 (Being Aman’s share of Goodwill transferred in their sacrificing Ratio)