Neetu, Meetu and Teetu were partners in a firm. On 1st January, 2018, Meetu retired. On Meetu's retirement the goodwill of the firm was valued at Rs 4,20,000.
Pass necessary journal entry for the treatment of goodwill on Meetu's retirement.
As the profit sharing ratio is not given, it is assumed to be equal, thus, Meetu’s Sharein profits is 1/3.
Goodwill of the firm = Rs. 4,20,000
Meetu’s share of goodwill `=4,20,000xx1/3=1,40,000`
|Jan 1,2018||Neetu’s Capital A/c Dr||70,000|
Teetu’s Capital A/c Dr
|To Meetu’s Capital A/c||1,40,000|
|(Being goodwill adjusted in the ratio 1:1)|