Question

Asha, Naveen and Shalini were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Goodwill appeared in their books at a value of ₹ 80,000 and General Reserve at ₹ 40,000. Naveen decided to retire from the firm. On the date of his retirement, goodwill of the firm was valued at ₹ 1,20,000. The new profit-sharing ratio decided among Asha and Shalini is 2 : 3.
Record necessary Journal entries on Naveen's retirement.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Asha’s Capital A/c	Dr.		40,000
	Naveen’s Capital A/c	Dr.		24,000
	Shalini’s Capital A/c	Dr.		16,000
	To Goodwill A/c				80,000
	(Existing goodwill written off amongst existing partners in old ratio)
	General Reserves A/c	Dr.		40,000
	To Asha’s Capital A/c				20,000
	To Naveen’s Capital A/c				12,000
	To Shalini’s Capital A/c				8,000
	(General Reserves distributed among all partners in old ratio)
	Shalini’s Capital A/c	Dr.		48,000
	To Asha’s Capital A/c				12,000
	To Naveen’s Capital A/c				36,000
	(Goodwill adjusted by debiting gaining partner and crediting sacrificing partner and retiring partner)

Calculation of Gaining Ratio: 

Gain of a Partner = New Share - Old share

Asha's Gain (sacrifice) : `2/5 - 5/10 = (4-5)/10 = ((-) 1)/10`

Shalini's Gain (sacrifice) : `3/5 - 2/10 = (6-2)/10 = 4/10`

Therefore,  Both Asha and Naveen would be compensated by Shalini in the Ratio of `1 : 3`

Asha's sacrifice for `1/10`th share = `1,20,000 xx 1/10 = 12,000`

Naveen's Sacrifice for `3/10`th share = `1,20,000 xx 3/10 = 36,000`