Illustration of admission of a new partner, Financial Accounting

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Illustration of Admission of a new partner

XYZ have been trading as equal partners having capital contributions of £300,000, £250,000 and £200,000 respectively. They agreed to admit W who agrees to pay capital of £350 which is inclusive of his share of goodwill. The new profit sharing ration will not be X:Y:Z:W : 4:3:2:1. Goodwill has been agreed at £200,000.

Required:
Prepare the partners capital accounts to record admission of W and assuming that Goodwill is not to be retained in the accounts.

Capital account
	X	Y	X	W		X	Y	Z	W
Goodwill	80	160	40	20	Bal. b/d	300	250	200	-
Bal c/d	286.667	256.667	226.666	330	Goodwill	66.667	66.667	66.666	-
					bank				350
	366.667	316.667	266.666	350		366.667	316.667	226.667	350

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