Question

A, B, C and D were partners sharing profits in the ratio of 5 : 3 : 2 : 2. B died on 1st March, 2022. Goodwill of the firm was valued at ₹ 6,00,000. A, C and D decided to share future profits equally. Give necessary journal entry.

Answer 1

Journal
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
(i)	C’s Capital A/c    ...Dr.		1,00,000
	D’s Capital A/c    ...Dr.		1,00,000
	To A’s Capital A/c			50,000
	To B’s Capital A/c			1,50,000
	(Being adjustment entry made for goodwill)

Working Notes:

1. Old ratio of A, B, C & D = 5 : 3 : 2 : 2

B died,

New ratio of A, C & D = 1 : 1 : 1

Gaining Ratio = New share – Old share

A sacrifices = `1/3-5/12`

= `(4-5)/12`

= `1/12`

C gains = `1/3-2/12`

= `(4-2)/12`

= `2/12`

D gains = `1/3-2/12`

= `(4-2)/12`

= `2/12`

2. Goodwill of the firm = ₹ 6,00,000

B’s share of Goodwill = `6,00,000xx3/12`

= ₹ 1,50,000

A’s share of Goodwill = `6,00,000xx1/12`

= ₹ 50,000

C’s share of Goodwill = `6,00,000xx2/12`

= ₹ 1,00,000

D’s share of Goodwill = `6,00,000xx2/12`

= ₹ 1,00,000