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 = (2-2)/6 = 1/6`
B's Gain = `1/3 - 1/6 = (2-1)/6 = 1/6`
D's Gain = `1/3 - 1/6 = (2-1)/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`
