Question

X, Y and Z were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Z retired and the new profit sharing ratio between X and Y was 1 : 2. On Z's retirement the goodwill of the firm was valued at ₹ 30,000. Pass necessary journal entry for the treatment of goodwill on Z's retirement.

Answer 1

Journal Entries
Date	Particulars	Debit (₹)	Credit (₹)
	Y's Capital A/c Dr.	5,000
	To Z's Capital A/c		5,000
	(Being Z's share of goodwill adjusted through Y's Capital Account on retirement)

Working note:

Given:

Old ratio of X : Y : Z = 3 : 2 : 1

New ratio of X : Y = 1 : 2

Goodwill = ₹ 30,000

Step 1: Z's Share of Goodwill

`₹ 30,000 xx 1/6 = ₹ 5,000`

Step 2: Gaining Ratio

X's old share = `3/6` = `1/2`

X's new share = `1/3`

X sacrifices:

`1/2 - 1/3 = 1/6`

Y's old share = `2/6 = 1/3`

Y's new share = `2/3`

Y gains:

`2/3 - 1/3 = 1/3`

Thus, Y is the only gaining partner.