Question

A, B and C are partners sharing profits in the ratio of 4 : 3 : 3. On C’s retirement the value of the firm’s Goodwill was agreed at 3,00,000. A and B agreed to share profits and losses in future in the ratio of 7 : 3. Give adjustment entry in relation to goodwill.

Answer 1

Journal Entry
Date	Particulars	L.F.	Dr.	Cr.
	A’s Capital A/c        ...Dr.		90,000
	To C’s Capital A/c			90,000
	(Being Valued Goodwill of the firm adjusted)

Working note:

Calculation of Gaining Ratio:

Gaining Ratio = New ratio - Old ratio

A’s gain = `7/10-4/10=3/10`

B’s gain = `3/10-3/10=0/10`

A : B = 3 : 0

Goodwill of the firm = `3,00,000xx3/10` = ₹ 90,000

A’s gain = 90,000