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CSEET · Fundamentals of Accounting · Partnership and LLP Accounts

X and Y share profits equally with goodwill not in the books. They admit Z for a 1/4 share, to be taken equally from X and Y. Z brings Rs 50,000 as capital and Rs 40,000 as premium for goodwill. What amount of goodwill premium is credited to X's capital account?

X's capital account is credited with Rs 20,000. Z takes 1/4 equally from both, so X and Y each sacrifice 1/8 and the Rs 40,000 goodwill premium is divided in the sacrificing ratio 1:1, giving X Rs 20,000.

  1. ARs 40,000
  2. BRs 20,000Correct
  3. CRs 10,000
  4. DRs 25,000

Explanation

Z takes 1/4 equally from X and Y, so each sacrifices 1/8. Sacrifice is equal, so the Rs 40,000 premium is shared 1:1. X gets Rs 20,000. Crediting by old ratio gives the same here, but Rs 10,000 wrongly applies Z's share to the premium.

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