Question

P, Q and R are partners in a firm sharing profits in the ratio of 3 : 3 : 2. From 1st April 2024, they decided to share profits equally. On that date following balances appeared in their books:

	₹
Workmen Compensation Reserve	72,000
Investment Fluctuation Reserve	30,000
Investments (At Cost)	6,00,000

Based on the above information you are required to answer the following alternate question:

If goodwill of the firm is valued at ₹ 2,40,000, then in respect of goodwill:

विकल्प

• Credit P by ₹ 90,000, 0 by ₹90,000 and R by ₹ 60,000

• Credit P, Q and R by ₹ 80,000 each

• Debit R by ₹ 20,000 and Credit P and Q by ₹ 10,000 each

• Debit P and Q by ₹ 10,000 each and Credit R by ₹ 20,000

Answer 1

Debit R by ₹ 20,000 and Credit P and Q by ₹ 10,000 each.

Explanation:

Journal Entry for adjustment of Goodwill will be:

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	R's Capital A/c `(2/24 "of" 2,40,000)`   ...Dr.		20,000
	To P's Capital A/c `(1/24 "of" 2,40,000)`			10,000
	To Q's Capital A/c `(1/24 "of" 2,40,000)`			10,000
	(Being adjustment for goodwill due to change in profit sharing ratio)

Working Note:

Calculation of Sacrifice or Gain:

`P = 3/8 - 1/3 = (9 - 8)/24 = 1/24 "Sacrifice"`

`Q = 3/8 - 1/3 = (9 - 8)/24 = 1/24 "Sacrifice"`

`R = 2/8 - 1/3 = (6 - 8)/24 = 2/24 "Gain"`