Question

Rani and Mani are partners in a firm sharing profits and losses in 3 : 2 ratio. On 1^st April, 2025 they admit Jasmine as a partner. Rani sacrifices `1/3`rd of her share, and Mani sacrifices `1/2`of his share. As per the provisions of the Partnership Deed, Goodwill is to be valued on the basis of two years’ purchase of the previous three years’ weighted average profit.

Weights applicable as 1, 2, and 3 for the years 2022-23, 2023-24, and 2024-25, respectively.

Profits for the previous three years are as follows:

Year	Profit (₹)
2022-23	56,000
2023-24	72,000
2024-25	85,000

During the year 2023-24, closing stock was undervalued by ₹ 5,000.

On the date of Jasmine’s admission, you are required to:

1. Calculate the firm’s Goodwill.
2. Calculate the new profit-sharing ratio of Rani, Mani, and Jasmine.

Answer 1

Weighted Average Profit:

Year	Adjusted Profit (₹)	Weight	Weight Profit (₹)
2022-23	56,000	1	56,000
2023-24	72,000 + 5,000 (Cl. Stock) = 77,000	2	1,54,000
2024-25	85,000 − 5,000 (Op. Stock) = 80,000	3	2,40,000
	Total	6	4,50,000

Weighted Average Profit = `(4,50,000)/6`

= 75,000

Goodwill = Weighted Average Profit × No. of Years’ Purchase

Goodwill = 75,000 × 2

= 1,50,000

Calculate Sacrificing Shares:

Rani’s Sacrifice = `1/3 xx 3/5`

= `3/15`

= `1/5`

Mani’s Sacrifice = `1/2 xx 2/5`

= `2/10`

= `1/5`

Calculation of New Profit-Sharing Ratio:

 New Share = Old Share − Sacrifice

Rani’s New Share = `3/5 - 1/5`

= `2/5`

Mani’s New Share = `2/5 - 1/5`

= `1/5`

 Jasmine’s New Share = Rani’s Sacrifice + Mani’s Sacrifice

= `1/5 + 1/5`

= `2/5`

New Profit-Sharing Ratio for Rani, Mani and Jasmine is 2 : 1 : 2.