Y & W were in partnership sharing profit & losses equally. They admit S as a partner with 1/3 and decide to share profits equally and S was to bring his share of goodwill in cash. Goodwill is valued at ₹60,000. The effect of this on Y's capital would be to -
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Increase it By ₹10000.
Share of S=1/3
Sacrificing Ratio=1:1
Share of S in Goodwill= 1/3*60000=20,000
Journal Entry for goodwill brought by S:
Goodwill A/c Dr 20,000
To Y 's Capital A/c 10,000
To W's Capital A/c 10,000
(Goodwill brought in by S shared by old partners in their ratio of sacrifice)