A, B, C and D are partners in a firm sharing profits, in the ratio of 2 : 1 : 2 : 1. On the retirement of C, Goodwill was valued ₹ 1,80,000. A, B and D decide to share future profits equally. Pass the necessary Journal entry for the treatment of goodwill.
Solution
Journal
Date 
Particulars 
L.F. 
Debit Amount (Rs) 
Credit Amount (Rs) 


B’s Capital A/c 
Dr 

30,000 


D’s Capital A/c 
Dr. 

30,000 


To C’s Capital A/c 



60,000 

(Adjustment of C’s share of goodwill) 




Working Notes:
WN1:Calculation of Gaining Ratio
`"A : B : C : D" = 2 : 1 : 2 : 1` (Old Ratio)
`"A : B : D" = 1 : 1 : 1` (New ratio)
`"Gaining Ratio" =" New Ratio  Old Ratio"`
A's Gain = `1/3  2/6 = (22)/6 = 1/6`
B's Gain = `1/3  1/6 = (21)/6 = 1/6`
D's Gain = `1/3  1/6 = (21)/6 = 1/6`
`"A : B : D" = 0 : 1 : 1`
WN2: Calculation of Retiring Partner’s Share of Goodwill
C's share of goodwill = `1,80,000 xx 2/6 = "Rs" 60,000`
C's Share of goodwill will be Brought By B and D in their gaining ratio `1 : 1`
Therefore, B's Capital A/c Will be debited with `60,000 xx 1/2 = "Rs" 30,000`
And, D's Capital A/c will be debited with `60,000 xx 1/2 = "Rs" 30,000`