A, B, and C are partners sharing profits in the ratio of `4/9: 3/9: 2/9`. B retires and his capital after making adjustments for reserves and gain (profit) on revaluation stands at ₹ 1,39,200. A and C agreed to pay him ₹ 1,50,000 in full settlement of his claim. Record necessary journal entry for adjustment of goodwill if the new profit-sharing ratio is decided at 5: 3.
Solution
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Journal Entries |
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Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
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A’s Capital A/c |
Dr. |
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5,850 |
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C’s Capital A/c |
Dr. |
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4,950 |
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To B’s Capital A/c |
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10,800 |
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(Adjustment of B’s share of goodwill) |
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Working Notes:
i) Calculation of B’s share of goodwill:
A, B, and C are sharing profits in ratio `4/9: 3/9: 2/9`
B retires from the firm. The remaining partners agreed to pay him Rs 1,50,000
B’s capital after making necessary adjustments Rs 1,39,200
Therefore, Hidden Goodwill is Rs (1,50,000 – 1,39,200) i.e. Rs 10,800
ii) Gaining Ratio:
New profit sharing ratio between A and B is 5: 3
A's gain = `5/8 - 4/9 = 13/72`
C's gain = `3/8 - 2/9 = 11/72`
Gaining ratio = 13: 11
Thus, B’s share of goodwill will be brought in by A and C in the gaining ratio 13: 11 i.e.
A is to be debited with `10,800 xx 13/24 = 5,850`.
C is to be debited with `10,800 xx 11/24 = 4.950`.
