Question

The goodwill of the firm is valued at ₹ 2,00,000. No goodwill account appears in the books. Pass necessary journal entry for recording the goodwill in the above mentioned case.

Answer 1

Journal Entries
Date	Particulars	L.F.	Debit ()	Credit ()
	B's Capital A/c   ...Dr.		50,000
	B's Capital A/c   ...Dr.		50,000
	To A's Capital A/c			1,00,000
	(Being retiring partner A's share of goodwill credited to his account and debited to continuing partners' capital accounts in their gaining ratio of 1 : 1)

Working note:

1. Determine A's Share of Goodwill

Total valued goodwill of the firm = ₹ 2,00,000

A's old profit-sharing share = `5/10`

A's Share of Goodwill = `2,00,000 xx 5/10 = 1,00,000`

2. Compensation by Gaining Partners

As calculated in the previous step, B and C take up A's share equally, making their Gaining Ratio = 1 : 1. They will compensate A for his share of goodwill in this ratio:

B's Contribution = `1,00,000 xx 1/2 = ₹ 50,000`

C's Contribution = `1,00,000 xx 1/2 = ₹ 50,000`