1. Admission and Withdrawal of a partner

2. 2) purchase of interest of old partners.
In this case the capital of the partnership will not be changed since the transaction is a personal transaction between the partners. And the amount paid by the new partner will be distributed between the old partners outside the partnership. (However, sometimes the partners agree to revaluate the assets before the admission).

3. Example A and B are partners in a general partnership
Example A and B are partners in a general partnership. They share the profit and losses on a basis of 2:3. their capital is 100,000 and respectively. Tamer is a new partner to be admitted to the partnership for 25% of the partner A’s capital and 20% of the partner B’s capital and Tamer paid to them cash. Required: Prepare the journal entry required to record the admission of Tamer .

4. Solution from partner A= 100000 X 25% = 25000
The capital of the new partner( Tamer):
from partner A= X 25% = 25000
from partner A= X 20% =
65000
SO, we will decrease the capital of A and B and increase the capital of the new partner and the entry will be as follows: Dr Cr
Capital, A
25000
Capital, B
40000
Capital, Tamer
65000

5. Withdrawal of a partner
In this case, it is important to know that we have to do the following steps :
1) Determining the capital of the partner at the time of withdrawal.
It means that any profits or losses, loans, drawings should be closed in the capital account of the partner.
2) Comparing between the balance of his capital and the amount paid to the partner.
The difference (excess payment or underpayment) could be treated as:
1- Goodwill Bonus

6. Example (1)
A, B and Nour are partners in a general partnership. They share net income on a basis of 2:1:4 respectively. If you know that: 1) The partner Nour withdrew from the partnership on 31 Dec for 30,000 in cash. 2) The capital of Nour at the date of withdrawing was Required: Prepare the journal entry to record the withdrawal of Nour.

7. Solution
Firstly ,we compare between the capital of withdrawing partner Nour and the paid amount to him as follows:
1) The capital of withdrawing partner Nour =
2) The paid amount =
There is no difference between the capital of Nour and the paid amount ,so there is no problem and the entry is: Dr Cr
Capital, Nour
30000
Cash

8. Partner Nour withdrew from the partnership for 36,000 in cash.
Example (2)
The same facts in ex. (1) but
Partner Nour withdrew from the partnership for 36,000 in cash.
Required :
Prepare the journal entry to record the withdrawal using the bonus method.

9. Solution 1)The capital of withdrawing partner Nour = 30000.
2) The paid amount =
The paid amount to the partner (36000) is more than his capital (30000) , so the difference (6000) is a bonus to Nour and will be deducted from the capital of remaining partners (A& B) by the ratio between them as follows:
A B Total =
The share of ( A) = * ( 2/3) = 4000
The share of ( B) = * ( 1/3) = 2000
So, the entry is:
Capital, Nour
30000
Capital, A
4000
Capital, B
2000
Cash
36000

10. Partner Nour withdrew from the partnership for 36,000 in cash.
Example (3)
The same facts in ex. (1) but
Partner Nour withdrew from the partnership for 36,000 in cash.
Required :
Prepare the journal entry to record the withdrawal using the goodwill method.

11. Solution 1)The capital of withdrawing partner Nour = 30000.
2) The paid amount =
The paid amount to the partner (36000) is more than his capital (30000) , so the difference (6000) is a goodwill to Nour and will be recorded in the entry .
So, the entry is:
Capital, Nour
30000
Goodwill
6000
Cash
36000

12. Partner Nour withdrew from the partnership for 27,000 in cash.
Example (4)
The same facts in ex. (1) but
Partner Nour withdrew from the partnership for 27,000 in cash.
Required :
Prepare the journal entry to record the withdrawal using the bonus method.

13. Solution 1)The capital of withdrawing partner Nour = 30000.
2) The paid amount =
The paid amount to the partner (27000) is less than his capital (30000) , so the difference (3000) is a bonus to remaining partners (A&B) and will be added to their capital by the ratio between them as follows:
A B Total =
The share of ( A) = * ( 2/3) = 2000
The share of ( B) = * ( 1/3) = 1000
So, the entry is:
Capital, Nour
30000
Capital, A
2000
Capital, B
1000
Cash
27000

14. Example (5)
The same facts in ex. (1) but
Partner Nour withdrew from the partnership for 27,000 in cash. If you know that the partnership has a goodwill account with balance
Required :
Prepare the journal entry to record the withdrawal using the goodwill method.

15. Solution 1)The capital of withdrawing partner Nour = 30000.
2) The paid amount =
The paid amount to the partner (27000) is less than his capital (30000) , so the difference (3000) is will be deducted from the goodwill account and will be recorded in the entry .
So, the entry is:
Capital, Nour
30000
Goodwill
3000
Cash
27000