Question

Vimal and Nirmal are partners in the ratio of 3 : 2. They admit Sushil for \( \frac{1}{3} \) share. Sushil brings Rs. 30,000 for his capital and also brings necessary amount of his share of goodwill in cash. On the date of admission, the goodwill of the firm is valued at Rs. 24,000. Goodwill already appears in the books at Rs. 12,000. Give necessary journal entries in the books of the firm.

Hint:

Always write off existing goodwill before adjusting new goodwill brought in by an incoming partner.

Answer 1

Goodwill of the firm is Rs. 24,000 and goodwill already appearing in the books is Rs. 12,000. The old goodwill must be written off between Vimal and Nirmal in the old ratio of 3 : 2. Sushil's share of goodwill is \( \frac{1}{3} \times 24,000 = 8,000 \), which he brings in cash. This Rs. 8,000 is credited to Vimal and Nirmal in the old ratio of 3 : 2. Sushil also brings Rs. 30,000 for capital. All entries below represent correct accounting treatment. 
Journal Entries: