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M.342 An Aid to Accountancy—CBSE XII

11. JOURNAL

Date Particulars L.F. Dr. (`) Cr. (`)
2017
April 1 A’s Capital A/c ...Dr. 25,600
B’s Capital A/c ...Dr. 6,400
To Profit and Loss A/c 32,000
(Being the loss distributed between old partners)
General Reserve A/c ...Dr. 1,00,000
To A’s Capital A/c 80,000
To B’s Capital A/c 20,000
(Being the General Reserve appropriated between old partners)
Cash/Bank A/c ...Dr. 60,000
To Premium for Goodwill A/c 60,000
(Being the premium for goodwill brought in by new partner)
Premium for Goodwill A/c ...Dr. 60,000
B’s Capital A/c ...Dr. 4,000
To A’s Capital A/c 64,000
(Being the premium for goodwill along with B’s Share of gain credited to A)

Working Note:
A B C
I. Old Share 4/5 1/5 —
II. New Share 4/9 2/9 3/9
III. Sacrifice/(Gain) (I – II) 16/45 –1/45 –3/9
(Sacrifice) (Gain) (Gain)
C’s Share of Goodwill for 3/9 share = ` 60,000
Firm’s Goodwill = ` 1,80,000
A alone has sacrificed whereas B has gained. Thus, B and C will compensate A for their gained shares.
Or
ADJUSTING ENTRY
Date Particulars L.F. Dr. (`) Cr. (`)
2018
April 1 Kala’s Capital A/c ...Dr. 8,400
To Mala’s Capital A/c 8,400
(Being the adjustment entry for Accumulated Profits, Losses and Reserves)
Working Notes:
1. Calculation of Net Effect of Accumulated Profits, Losses and Reserves: `
General Reserve 28,000
Contingencies Reserve 3,000
Profit and Loss A/c (Cr.) 9,000
Advertisement Suspense A/c (Dr.) (12,000)
Net Effect 28,000
` 28,000 will be adjusted as the gain or sacrifice of partners.