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L, M And O Are Partners Sharing Profits and Losses in the Ratio of 4 : 3 : 2. M Retires and the Goodwill is Valued At ₹ 72,000. - Accountancy

Numerical

L, M and O are partners sharing profits and losses in the ratio of 4 : 3 : 2. M retires and the goodwill is valued at ₹ 72,000. Calculate M's share of goodwill and pass the Journal entry for Goodwill. L and O decided to share the future profits and losses in the ratio of 5 : 3.

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Solution

Journal

Particulars

L.F.

Date

Amount

Rs

Credit

amount

Rs

L’s Capital A/c

Dr.

 

13,000

 

O’s Capital A/c

Dr.

 

11,000

 

To M’s Capital A/c

 

 

24,000

(Adjustment M’s share of goodwill made)

 

 

 

Working Note:

WN 1 Calculation of Gaining Ratio

Old Ratio (L, M and O) = 4 : 3 : 2

M retires from the firm.

New Ratio (L and O) = 5 : 3

Gaining Ratio = New Ratio − Old Ratio

L's share = `5/8 - 4/9 = (45-32)/72 = 13/72`

O's share = `3/8 - 2/9 = (27-16)/72 = 11/72`

∴ Gaining Ratio = 13 : 11

WN 2 Adjustment of Goodwill

Goodwill of the firm = Rs 72,000

M's share of goodwill =`72000 xx 3/9 = Rs 24000`

This share of goodwill is to be debited to remaining Partners’ Capital Accounts in their gaining ratio (i.e. 13 : 11).

L is to be debited with `24,000 xx 13/24 =  "Rs" 13,000`

O is to be debited with `24,000 xx 11/24 =  "Rs" 11,000`

Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio
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APPEARS IN

TS Grewal Class 12 Accountancy - Double Entry Book Keeping Volume 1
Chapter 6 Retirement/Death of a Partner
Exercise | Q 13 | Page 78
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