Question

X, Y and Z are partners sharing profits in the ratio of 3 : 2 : 1. Goodwill is appearing in the books at a value of ₹ 60,000. Y retires and at the time of Y's retirement, goodwill is valued at ₹ 84,000. X and Z decided to share future profits in the ratio of 2 : 1. Pass the necessary Journal entries through Goodwill Account.

Answer 1

Journal

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	X’s Capital A/c	Dr.		30,000
	Y’s Capital A/c	Dr.		20,000
	Z’s Capital A/c	Dr.		10,000
	To Goodwill A/c				60,000
	(Goodwill written off)
		Dr.		14,000
	X’s Capital A/c	Dr.		14,000
	Z’s Capital A/c				28,000
	To Y’s Capital A/c
	(Adjustment of Y’s share of goodwill)

Working Notes:

WN1:Calculation of Gaining Ratio

`"X : Y : Z" = 3 : 2 : 1` (Old ratio)

`"X : Z" = 2 : 1` (New ratio)

Gaining ratio = New ratio - old ratio 

X's gain = `2/3 - 3/6 = 1/6`

Z's Gain = `1/3 - 1/6 = 1/6`

`"X : Z" = 1 : 1`

WN2: Calculation of Retiring Partner’s Share of Goodwill

Y's share of goodwill will be brought by X and Z in their gaining ratio `1: 1`

Therefore, X's Capital A/c will be debited with `28,000 xx 1/2 = "Rs" 14,000` 

And, Y's Capital A/c will be debited with `28,000 xx 1/2 = "Rs" 14,000`