Question

Adil, Bunty and Cris are in partnership, sharing profits `4/8, 3/8 and 1/8` respectively. It is provided in the Partnership Deed that on the death of any partner his share of goodwill is to be valued at one-half of the net profit credited to his account during the last four completed years.

Bunty died on 1st April, 2026. The firm’s profits for the last four years ended 31st March, were as: 2023-1,20,000; 2024-80,000; 2025-40,000; 2026-80,000.

1. Determine the amount that should be credited to Bunty in respect of his share of Goodwill.
2. Pass Journal entry for adjustment of Goodwill.

Answer 1

Calculation of Bunty’s Share of Goodwill:

Total Profits for the Last 4 Years:

Total Profit = 1,20,000 + 80,000 + 40,000 + 80,000

= 3,20,000

Bunty’s profit-sharing ratio = `3/8`

Bunty’s Share of Profit = `3,20,000 xx 3/8`

= 1,20,000

Goodwill is valued at one-half `(1/2)`of the profit credited to him.

Bunty’s Goodwill = `1,20,000 xx 1/2`

= 60,000

Divide Bunty’s Goodwill between Gaining Partners:

Adil’s Share = `60,000 xx 4/5`

= 48,000

Cris’s Share = `60,000 xx 1/5`

= 12,000

Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2026 Apr 1	Adil’s Capital A/c   ...Dr.		48,000	-
	Cris’s Capital A/c   ...Dr.		12,000	-
	To Bunty’s Capital A/c		-	60,000
	(Being Bunty’s share of goodwill adjusted among continuing partners in their gaining ratio of 4 : 1)