Question

Mita, Geeta and Mohit were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. With effect from 1^st April 2022, they mutually agreed to share profits and losses in the ratio of 2:2:1. It was agreed that:

1. Goodwill of the firm was valued at ₹ 1,40,000.
2. Profit on revaluation of assets and re-assessment of liabilities amounted to ₹ 1,20,000.

Pass necessary journal entries for the above transactions in the books of the firm. Show your working notes clearly. 

Answer 1

Old Ratio = 5 : 3 : 2

New Ratio = 2 : 2 : 1

Gain in Ratio = New Ratio - Old Ratio

Mita =`2/5-5/10=(4-5)/10=(-1)/10`(Sacrifice)

Geeta =`2/5 - 3/10=(4-3)/10 =1/10`(Gain)

Mohit =`1/5-2/10= ` Nil

Goodwill = `1,40,000xx1/10 = ₹ 14,000`

Journal Entries
Date	Particulars	L.F	Debit (₹)	Credit (₹)
(i)	Geeta's Capital A/c      ...Dr.		14,000	-
	To Mita's Capital A/c		-	14,000
	(Being goodwill adjusted)
(ii)	Revaluation A/c        ...Dr.		1,20,000	-
	To Mita's Capital A/c		-	60,000
	To Geeta's Capital A/c		-	36,000
	To Mohit's Capital A/c		-	24,000
	(Being profit on revaluation distributed)