Question

Deepak, Senthil and Santhosh are partners sharing profits and losses equally. They admit Jerald into partnership for 1/3 share in future profits. The goodwill of the firm is valued at Rs. 45,000 and Jerald brought cash for his share of goodwill. The existing partners withdraw half of the amount of their share of goodwill. Pass necessary journal entries for adjusting goodwill on the assumption that the fluctuating capital method is followed.

Answer 1

Journal Entries

erald’s Share of goodwill = Rs. 45000 x 1/3 = Rs. 1,500 

As the sacrifice made by the existing partners is not mentioned. It is assumed that they sacrifice in their old share profit ratio = 1 : 1 : 1. 

Therefore, Sacrificing ratio = 1 : 1 : 1.