Question

Vijay, Ravi and Raman were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. On 1st April, 2024, they admitted Kamal as a new partner for $\dfrac{1}{10}$\th share. New profit sharing ratio: 4 : 2 : 3 : 1. Goodwill of the firm = ₹ 6,00,000. Kamal brings his share of goodwill in cash. (i) Calculate the sacrificing ratio
(ii) Pass journal entries for goodwill treatment in the books of the firm

Hint:

Sacrifice = Old – New share. Goodwill is always shared by sacrificing partners only.

Answer 1

(i) Sacrificing Ratio:
Old Ratio = 5 : 3 : 2
New Ratio = 4 : 2 : 3 : 1
Total old parts = 10 → Vijay = 5/10, Ravi = 3/10, Raman = 2/10
Total new parts = 10 → Vijay = 4/10, Ravi = 2/10, Raman = 3/10, Kamal = 1/10

Sacrifice = Old Share – New Share:
Vijay = 5/10 – 4/10 = 1/10
Ravi = 3/10 – 2/10 = 1/10
Raman = 2/10 – 3/10 = –1/10 (Gain)

Sacrificing Ratio (Only Vijay and Ravi): 1 : 1

(ii) Journal Entry for Goodwill:
Kamal’s share of goodwill = ₹ 6,00,000 × $ \dfrac{1}{10} $ = ₹ 60,000
This is to be shared between Vijay and Ravi in 1 : 1