Question

A, B and C were partners in a firm sharing profits in the ratio of 6 : 5 : 4. Their capitals were A, Rs 1,00,000, B Rs 80,000 and C Rs 60,000 respectively. On 1^st April 2009 ‘C’ retired from the firm and the new profit sharing ratio between A and B was decided as 11 : 4. On C’s retirement the goodwill of the firm was valued at Rs 90,000. Showing your calculation clearly, pass necessary journal entry for the treatment of goodwill on C’s retirement. 

Answer 1

Gaining Ratio = New Ratio − Old Ratio 

A=`11/5-6/15=5/15` (Gain)  

B=`4/15-5/15=(-1)/15` (Sacrifice)  

Thus, A is the only gaining partner. He will compensate not only C but also B, the sacrificing partner. Goodwill of the firm = Rs

90,000

C’s share of goodwill = Rs 90,000 × 4/15 = Rs 24,000

A to compensate B to the extent of the sacrifice made by him i.e. Rs 90,000 × 1/15 = Rs 6,000.

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	A’s Capital A/c	Dr.		30,000
	To B’s Capital A/c				6,000
	To C’s Capital A/c				24,000
	(C’s share of goodwill adjusted on his retirement)