Question

A, B and C are partners in a firm sharing profits in the ratio 2 : 3 : 1. C retired and the balance in his capital account before making any adjustment was ₹ 82,000. General Reserve in the firm was shown at ₹ 30,000 and loss due to revaluation of assets and re-assessment of liabilities was ₹ 12,000. A and B agreed to pay C ₹ 1,15,000 in full settlement of his claim.

Record the necessary journal entry for goodwill on C's retirement.

Answer 1

Books of A, B, and C JOURNAL
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	A's Capital A/c   ...Dr.		12,000
	B's Capital A/c   ...Dr.		18,000
	To C's Capital A/c			30,000
	(C's share of goodwill adjusted to capital accounts of A and B in their gaining ratio 2 : 3)

Working Note:

(i) Calculation of Adjusted Capital of C:

Particulars		₹
Capital of C (given)	=	82,000
Add: Share in General Reserve (\[\frac{1}{6} \times 30,000\])	=	5,000
		87,000
Less: Share in loss on revaluation ($\frac{1}{6} \times 12,000$)	=	2,000
Adjusted Capital of C		85,000

(ii) Calculation of Hidden Goodwill :

Particulars		₹
Amount payable to C in full settlement	=	1,15,000
Less: Adjusted Capital of C	=	85,000
C's Share in Goodwill		30,000