Question : Match the following with respect to journal entries for treatment of goodwill :
|
i. |
The incoming partner brings his share of goodwill, |
A. |
No entry |
|
ii. |
The incoming partner does not bring his share of the goodwill |
B. |
Premium for goodwill A/c. Dr. Incoming Partner’s Capital A/c. Dr. To Sacrificing Partners Capital A/c. |
|
iii. |
Incoming partner pays his share of goodwill privately |
C |
Premium for goodwill A/c. Dr. To Sacrificing Partners Capital A/c. |
|
iv. |
Incoming partner brings only a part of his share of goodwill |
D. |
New Incoming Partner’s Capital A/c. Dr. |
Option 1: i- B, ii-C, iii-A, iv-D
Option 2: i- C, ii-D, iii-A, iv-B
Option 3: i- D, ii-C, iii-A, iv-B
Option 4: i- D, ii-C, iii-B, iv-A
Correct Answer: i- C, ii-D, iii-A, iv-B
Solution : Answer = i- C, ii-D, iii-A, iv-B
i. When the incoming partner brings his share of goodwill, the journal entry includes debiting Premium for Goodwill Account and crediting Sacrificing Partners' Capital Account.
ii. For the incoming partner who does not bring his share of goodwill, the journal entry is to credit the New Partner's Capital Account and debit the Sacrificing Partner's Capital Account.
iii. When the incoming partner pays his share of goodwill privately, there is no journal entry as it does not involve the firm's accounts.
iv. If the incoming partner brings only a part of his share of goodwill, the journal entry is:
Premium for goodwill A/c. Dr
Incoming Partner’s Capital A/c. Dr.
To Sacrificing Partners Capital A/c
Hence, the correct option is 2.
Related Questions
Question : E and F were partners in a firm sharing profits in the ratio of 3: 1. They admitted G as a new partner on 1-3-2017 for 1/3rd share. It was decided that E, F and G will share future profits equally. G brought Rs.50,000 in cash and machinery worth Rs.70,000 for his share of profit as premium for goodwill.
Which journal entries will be passed for accounting for Goodwill .
Option 1:
Which journal entries will be passed for accounting for Goodwill .
|
Cash A/c |
Dr. |
50,000 |
||
|
Machinery A/c |
Dr. |
70,000 |
||
|
To Premium for Goodwill A/c |
1,20,000 |
|||
|
(Cash and Machinery contributed by G on his admission, as his share of goodwill premium) |
||||
|
Premium for Goodwill A/c |
Dr. |
1,20,000 |
||
|
F’s Capital A/c |
Dr. |
30,000 |
||
|
To E’s Capital A/c |
1,50,000 |
|||
|
(Premium for goodwill brought in by G Credited to E along with 1/12 of the goodwill to be contributed by F due to gain in his profit sharing ratio) |
||||
Option 2:
|
Date |
Particulars |
L.F. |
Dr. (Rs.) |
Cr. (Rs.) |
|
|
2017 |
Cash A/c |
Dr. |
50,000 |
||
|
March 1 |
Machinery A/c |
Dr. |
70,000 |
||
|
To Premium for Goodwill A/c |
1,20,000 |
||||
|
(Cash and Machinery contributed by G on his admission, as his share of goodwill premium) |
|||||
|
March 1 |
Premium for Goodwill A/c |
Dr. |
1,50,000 |
||
|
. |
|||||
|
To E’s Capital A/c |
1,50,000 |
||||
Option 3:
|
Cash A/c |
Dr. |
50,000 |
||
|
Machinery A/c |
Dr. |
70,000 |
||
|
To Premium for Goodwill A/c |
1,20,000 |
|||
|
(Cash and Machinery contributed by G on his admission, as his share of goodwill premium) |
||||
|
Premium for Goodwill A/c |
Dr. |
1,20,000 |
||
|
To F’s Capital A/c |
. |
30,000 |
||
|
To E’s Capital A/c |
90,000 |
Option 4: None of the above
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