Practicing Success
Read the following hypothetical text and answer the questions. |
What will be the entry for the distribution of Rajesh's share of goodwill? |
Premium for Goodwill A/c Dr. Rs 70,000 Premium for Goodwill A/c Dr. 3,50,000 Rajesh Capital A/c Dr. ₹70,000 Either 1 or 3 |
Premium for Goodwill A/c Dr. Rs 70,000 |
The amount of premium brought in by the new partner is shared by the existing partners in their ratio of sacrifice. If this amount is paid to the old partners directly (privately) by the new partner, no entry is passed in the books of the firm. But, when the amount is paid through the firm, which is generally the case, the following journal entries are passed:
So, JOURNAL ENTRY WILL BE- Premium for Goodwill A/c Dr. Rs 70,000
As, old ratio becomes sacrificing ratio means 3:2. So, goodwill will be distributed in this ratio to old partners. So, JOURNAL ENTRY WILL BE- Or Premium for Goodwill A/c Dr. Rs 70,000
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