A and B are partners in a firm and share profits and losses in the ratio of 3 ∶ 2. C joins firm as a new partner and contributes ₹6,000 as a premium for goodwill in cash. Here, the premium for goodwill shall be shared by A and B on the basis of new profit sharing ratio, that is 5 ∶ 3 ∶ 2 as
₹3,000 ∶ ₹3,000
Understanding Premium for Goodwill in Partnership
When a new partner is admitted into a firm, they often bring in an amount as premium for goodwill. This amount is compensation for the old partners for their share of the future profits that the new partner will now enjoy. The total premium for goodwill brought in by C is ₹6,000.
Distribution of Premium for Goodwill
The premium for goodwill brought in by the incoming partner is typically distributed among the old partners who have sacrificed a portion of their profit share in favour of the new partner. The distribution ratio is the sacrificing ratio of the old partners.
In this problem, A and B are the old partners. C is the new partner. The premium for goodwill of ₹6,000 needs to be shared between A and B.
The question mentions the old profit sharing ratio of A and B is 3:2 and the new profit sharing ratio of A, B, and C is 5:3:2. However, the premium for goodwill is shared among the old partners (A and B) based on their sacrifice, not the new overall ratio of all partners.
Calculating the Share of Premium for Goodwill
The problem provides the correct answer distribution as ₹3,000 ∶ ₹3,000 for A and B. This implies that the premium for goodwill of ₹6,000 is shared equally between A and B.
Let's verify this distribution:
- A's share of premium for goodwill = Total premium × A's share in distribution ratio
- B's share of premium for goodwill = Total premium × B's share in distribution ratio
If the premium for goodwill is shared equally (in a 1:1 ratio) between A and B, then:
- A's share = ₹6,000 × $\frac{1}{1+1} = \text{₹}6,000 \times \frac{1}{2} = \text{₹}3,000$
- B's share = ₹6,000 × $\frac{1}{1+1} = \text{₹}6,000 \times \frac{1}{2} = \text{₹}3,000$
This calculation matches the distribution provided in the correct answer option, which is ₹3,000 ∶ ₹3,000. Although the question mentions sharing based on the new profit sharing ratio, the actual distribution shown in the correct option indicates an equal sharing of the premium for goodwill between A and B. The standard practice is to share the premium for goodwill in the sacrificing ratio. If A and B sacrificed equally, their sacrificing ratio would be 1:1, leading to this distribution.
Therefore, the premium for goodwill of ₹6,000 is shared as ₹3,000 for A and ₹3,000 for B.
| Particulars | Amount (₹) |
|---|---|
| Total Premium for Goodwill | 6,000 |
| A's Share | 3,000 |
| B's Share | 3,000 |
The premium for goodwill is credited to the old partners' capital accounts in their sharing ratio for goodwill.
Important Questions from Partnership
Kiran, Vimal and Naveen started a business by investing Rs. 1,35,000, Rs. 1,50,000 and Rs. 1,65,000 respectively. Find the share of each (respectively), out of an annual profit of Rs. 60,000.
When the incoming partner cannot bring premium for goodwill, then the necessary adjustment for goodwill is done through which one of the following?
Which one of the following rights is usually not available to a partner consequent to the dissolution of a firm?
A, B, C invest Rs. 20000, Rs. 30000, Rs. 40000 in a business. After one year, A withdrew his money but B and C continued for one more year. If the net profit after 2 years be Rs. 32000, then A’s share in the profit is:
Manoj received Rs. 6000 as his share out of the total profit of Rs. 9000 which he and Ramesh earned at the end of one year. If Manoj invested Rs. 20000 for 6 months, whereas Ramesh invested his amount for the whole year, what was the amount invested by Ramesh?
