Question

Kavi, Ravi, Kumar and Guru were partners in the firm sharing profits in the ratio of 3:2:2:1. On 1.2.2017, Guru retired and the new profit sharing ratio decided between Kavi, Ravi and Kumar were 3:1:1. On Guru’s retirement, the goodwill of the firm was valued at Rs 3, 60,000. Showing your working notes clearly, pass necessary journal entry in the books of the firm for the treatment of goodwill on Guru’s retirement

Answer 1

Journal
Date	Particulars	L.F	Dr. Rs	Cr. Rs
	Kavi’s Capital A/c             Dr.        To Ravi’s Capital A/c        To Kumar’s Capital A/c        To Guru’s Capital A/c (Being new goodwill adjusted)		81,000	18,000 18,000 45,000

Working Note:

Gaining Ratio = New Ratio - Old Ratio

Kavi = `3/5 - 3/8`

= `(24 - 15)/40`

`= 9/40`

Ravi = `1/5 - 2/8`

`= (8 - 10)/40`

`= 2/40 ("sacrificing")`

Kumar = `1/5  2/8`

`= (8 - 10)/40`

= `-2/40` (sacrificing)

Goodwill Valued = 360000

kavi = Rs `360000 xx 9/40 = Rs  81000`

Ravi = `Rs 360000 xx 2/40 = Rs 18000`

Kumar =  `Rs 360000 xx 2/40 = Rs 18000`

Guru = `Rs 360000 xx 1/8 = Rs  45000`