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Question
Avya, Divya and Kavya were equal partners. They decided to change the profit-sharing ratio to 4 : 3 : 2. For this purpose, the goodwill of the firm was valued at ₹ 90,000. The journal entry for the treatment of goodwill on change in profit sharing ratio will be:
Options
Particulars L.F. Amount
Dr. (₹)Amount
Cr. (₹)Kavya’s Capital A/c ...Dr. 10,000 - To Avya’s Capital A/c - 10,000 Particulars L.F. Amount
Dr. (₹)Amount
Cr. (₹)Divya’s Capital A/c ...Dr. 10,000 - To Avya’s Capital A/c - 10,000 Particulars L.F. Amount
Dr. (₹)Amount
Cr. (₹)Avya’s Capital A/c ...Dr. 90,000 - To Kavya’s Capital A/c - 90,000 Particulars L.F. Amount
Dr. (₹)Amount
Cr. (₹)Avya’s Capital A/c ...Dr. 10,000 - To Kavya’s Capital A/c - 10,000
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Solution
| Particulars | L.F. | Amount Dr. (₹) |
Amount Cr. (₹) |
| Avya’s Capital A/c ...Dr. | 10,000 | - | |
| To Kavya’s Capital A/c | - | 10,000 |
Explanation:
Avya’s Gain = `4/9 - 1/3 = 4/9 - 3/9 = 1/9`
Kavya’s sacrifice = `1/3 - 2/9 = 3/9 - 2/9 = 1/9`
Thus the sacrificing value of goodwill is `1/9 xx ₹ 90,000` = ₹ 10,000 which will be transferred from Avya (Gaining Partner) to kavya (Sacrificing Partner)
Thus, sacrificing value of goodwill is ₹ 10,000.
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