Asin and Shreyas are partners in a firm. They admit Ajay as a

41 :- Asin and Shreyas are partners in a firm. They admit Ajay as a new partner with 1/5th share in the profits of the firm. Ajay brings Rs 5,00,000 as his share of capital. The value of total assets of the firm was Rs 15,00,000 and outside liabilities were valued at Rs 5,00,000. on that date. Give necessary journal entry to record goodwill at the time of Ajay’s admission. Also show your workings.

Solution :-

WORKING NOTES :-
(a) Calculation of goodwill of the firm
Goodwill = Total assets – total liabilities
= 15,00,000 – 5,00,000
= Rs 10,00,000

(b) Calculation of premium for goodwill
Ajay’s premium for goodwill = 10,00,000 x 1/5 = Rs 2,00,000
Asin’s share of premium = 2,00,000 x 1/2 = Rs 1,00,000
Shreyas’s share of premium = 2,00,000 x 1/2 = Rs 1,00,000