Page 89 - DEBKVOL-1

Chapter 5 Admission of a Partner 5.5
.
(ii) Sacrifice made by the old partners is:
A’s sacrifice = 1/4 × 1/5 = 1/20; B’s sacrifice = 1/4 × 1/5 = 1/20;
C’s sacrifice = 1/4 × 3/5 = 3/20.
New profit share is determined by deducting the sacrifice made by old partners from
their old profit share. Thus, new profit share of
A = 3/10 – 1/20 = 5/20; B = 2/10 – 1/20 = 3/20; C = 5/10 – 3/20 = 7/20; D = 1/4 or 5/20.
Thus, New Profit-sharing Ratio of A, B, C and D will be 5 : 3 : 7 : 5.
(iii) Old ratio of A and B = 5 : 4 or 5/9 : 4/9
C’s share, which he acquires from A = 1/9
Remaining share of A = 5/9 – 1/9 = 4/9
New Profit-sharing Ratio of A, B and C = 4/9 : 4/9 : 1/9 or 4 : 4 : 1.
Illustration 3.
X and Y are in partnership sharing profits and losses in the ratio of 4 : 1. They admit Z
into the firm for an equal share. Calculate sacrificing ratio.

Solution: Calculation of Sacrificing Ratio
Partners Old Share New Share Sacrifice/Gain
X 4/5 1/3 4/5 – 1/3 = 7/15 (Sacrifice)
Y 1/5 1/3 1/5 – 1/3 = –2/15 (Gain)

Illustration 4.
X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2. They admit Z
as a partner for 1/5th share. This share is contributed by them in the ratio of 2 : 3. Goodwill
of the firm is valued at ` 50,000. Z brings in the necessary amount in cash as his share of
firm’s goodwill and ` 30,000 as his capital. Pass necessary Journal entries if capitals are fixed
under each of the following alternative cases:
Case 1. When the amount of goodwill is retained in the firm.
Case 2. When the amount of goodwill is withdrawn by the concerned partners to the
extent of 50% of what is credited to them.

Solution: JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)

Case 1 Cash A/c ...Dr. 40,000
To Z’s Capital A/c 30,000
To Premium for Goodwill A/c (` 50,000 × 1/5) 10,000
(Amount brought in by Z for his share of goodwill and capital)
Premium for Goodwill A/c (` 50,000 × 1/5) ...Dr. 10,000
To X’s Current A/c (` 10,000 × 2/5) 4,000
To Y’s Current A/c (` 10,000 × 3/5) 6,000
(Share of Z in goodwill credited to X and Y in their
sacrificing ratio, i.e., 2 : 3)