Passing General Entries for Admission of C into the Partnership

Given information:
- A and B are partners sharing profits in the ratio 3:2.
- C is admitted into the partnership with a 3/7 share of profits.
- C's share is divided as 2/7 from A and 1/7 from C.
- C brings Rs. 30,000 as his share of goodwill at the time of admission.
- The value of goodwill appears in the books at Rs. 20,000.

To record the admission of C into the partnership, the following general entries need to be passed:

1. To record the payment of goodwill by C:
Goodwill A/c Dr. = Rs. 20,000
To C's Capital A/c = Rs. 30,000

2. To record the transfer of C's share of goodwill to partners' capital accounts:
C's Capital A/c Dr. = Rs. 10,714 [(3/7) x Rs. 20,000]
To A's Capital A/c = Rs. 7,143 [(2/7) x Rs. 20,000]
To B's Capital A/c = Rs. 3,571 [(1/7) x Rs. 20,000]

3. To record the admission of C into the partnership:
C's Capital A/c Dr. = Rs. 30,000
To A's Capital A/c = Rs. 20,000
To B's Capital A/c = Rs. 10,000

Explanation:

The first entry records the payment of goodwill by C. Goodwill is an intangible asset that is not shown in the balance sheet but is recorded in the books of accounts. C's payment of Rs. 30,000 for his share of goodwill is debited to the Goodwill account and credited to his Capital account.

The second entry is passed to transfer C's share of goodwill to the Capital accounts of A and B in their profit-sharing ratio. This is done because goodwill is an asset of the firm and the partners' capital accounts need to reflect their share in the asset. The debit entry is made to C's Capital account, and the credit entries are made to A's and B's Capital accounts.

The third entry records the admission of C into the partnership. C's Capital account is debited with Rs. 30,000, and A's and B's Capital accounts are credited with their respective share of C's contribution.

Thus, these three entries will record the admission of C into the partnership and the transfer of his share of goodwill to the existing partners.

1)first we will write off the already given goodwill-:(in old psr)
A's capital a/c dr. 12000
B's capital a/c dr. 8000
To goodwill a/c 20000

2)we will make the entry of the goodwill brought in by new partner-:

cash a/c dr. 30000
To premium for goodwill a/c 30000

3) Now we will distribute the premium among sacrificing partners in sacrificing ratio-:

premium for goodwill a/c dr. 30000
To A's capital a/c 20000
To B's capital a/c 10000

*make sure to write the narration *