Accountancy Part AAdmission of a Partner

A, B and C are partners in a firm sharing profits in the ratio of 2 :…

A, B and C are partners in a firm sharing profits in the ratio of 2 : 2 : 1. D is admitted for 1/5^th share in profits. He will bring ₹35,000 as his capital in the firm. The capitals of A, B and C after all the adjustments are ₹40,000, ₹35,000 and ₹30,000 respectively. What will be the share of goodwill of D?

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → ₹7,000

No goodwill is given, so it is inferred from D’s capital and share (hidden goodwill).

Total capital of the new firm on D’s basis = ₹35,000 × 5 = ₹1,75,000

Actual capitals = ₹40,000 + ₹35,000 + ₹30,000 + ₹35,000 = ₹1,40,000

Goodwill of the firm = ₹1,75,000 − ₹1,40,000 = ₹35,000

D’s share of goodwill = ₹35,000 × 1/5 = ₹7,000

NCERT (2026-27 edition):
Hidden Goodwill – “… Sometimes the value of goodwill is not given at the time of admission of a new partner. In such a situation it has to be inferred from the arrangement of the capital and profit sharing ratio. Suppose, A and B are partners sharing profits equally with capitals of Rs. 45,000 each. They admitted C as a new partner for one-third share in the profit. C brings in Rs. 60,000 as his capital. Based on the amount brought in by C and his share in profit, the total capital of the newly constituted firm works out to be Rs.1,80,000 (Rs. 60,000 × 3). But the actual total capital of A, B and C works out as Rs. 1,50,000 (Rs. 45,000 + Rs. 45,000 + Rs. 60,000). Hence, it can be inferred that the difference is on account of goodwill i.e., Rs. 30,000 (Rs. 1,80,000 – Rs. 1,50,000).”