Question

Aarushi and Gauri are partners in a firm, sharing profits and losses in the ratio of 3 : 2. On 31st March, 2024, their Balance Sheet was as under:

Liabilities	₹	₹	Assets	₹
Sundry Creditors		1,50,000	Land and Building	3,00,000
General Reserve		60,000	Investments	2,00,000
Profit and Loss A/c		80,000	Sundry Debtors	1,10,000
Investment Fluctuation Reserve		50,000	Cash in Hand	30,000
Capital A/cs:
Aarushi	1,50,000
Gauri	1,50,000	3,00,000
		6,40,000		6,40,000

The partners decided that with effect from 1st April, 2024, they would share profits and losses equally.

You are required to answer the following alternate question:

If Goodwill is valued at 1,00,000, then:

विकल्प

• Debit Aarushi by ₹ 10,000 and Credit Gauri by ₹ 10,000

• Debit Gauri by ₹ 10,000 and Credit Aarushi by ₹ 10,000

• Credit Aarushi by ₹ 60,000 and Gauri by ₹ 40,000

• Credit Aarushi and Gauri by ₹ 50,000 each

Answer 1

Debit Gauri by ₹ 10,000 and Credit Aarushi by ₹ 10,000

Explanation:

Journal Entry for Goodwill will be:

Date	Particualrs	L.F.	Debit (₹)	Credit (₹)
	Gauri's Capital A/c   ...Dr.		10,000
	To Aarushi's Capital A/c			10,000
	(Being adjustment for Goodwill)

Sacrifice of Gain:

Old Ratio 3 : 2; New Ratio 1 : 1

Aarushi = `3/5 - 1/2 = (6 - 5)/10 = 1/10 "Sacrifice"`

Gauri = `2/5 - 1/2 = (4 - 5)/10 = 1/10 "Gain"`

Since Aarushi has sacrificed, she will be Credited from `1/10` of ₹ 1,00,000 = ₹ 10,000

Since Gauri has gained, she will be Debited from `1/10` of ₹ 1,00,000 = ₹ 10,000