Question

L, M and N are three partners sharing profits in the ratio of 4 : 3 : 2 respectively. M retires and the goodwill is valued at ₹ 1,08,000. No goodwill account appears as yet in the books of the firm. L and N will share profits in future in the ratio of 5 : 3 respectively. Pass Journal Entry for goodwill.

Answer 1

Journal
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	L’s Capital A/c      ...Dr.		19,500
	N’s capital A/c      ...Dr.		16,500
	To M’s capital A/c			36,000
	(Being Valued goodwill adjusted)

Calculation of gaining ratio of partner

Profit-sharing ratio of L, M and N is 4 : 3 : 2

New profit sharing ratio of L and N is 5 : 3

L’s gaining ratio = `5/8-4/9=(45-32)/72=13/72`

N’s gaining ratio = `3/8-2/9=(27-16)/72=11/72`

∴ Gaining ratio of L and N is 13 : 11.

Calculation of partner’s share in goodwill of the firm

Valued Goodwill of the firm = ₹ 1,08,000

M’s share in goodwill = `108000xx3/9`

= ₹ 36,000

L and N will contribute it in their gaining ratio, i.e., 13:11.

L will contribute = `36000xx13/24` = ₹ 19500

N will contribute = `36000xx11/24` = ₹ 16,500