Question

Ravi, Mukesh, Naresh and Yogesh are partners in a firm sharing profits in the ratio of 2 : 2 : 1 : 1. On Mukesh’ s retirement the goodwill of the firm is valued at ₹ 90,000. Ravi, Naresh and Yogesh decided to share future profits equally. Pass the necessary journal entry for the treatment of goodwill.

Answer 1

Journal Entry
Date	Particulars	L.F.	Dr.	Cr.
	Naresh’s Capital A/c        ...Dr.		15,000
	Yogesh’s Capital A/c        ...Dr.		15,000
	To Mukesh’s Capital A/c			30,000
	(Being Valued Goodwill of the firm adjusted)

Working note:

1. Calculation of Gaining ratio of Ravi, Naresh & Yogesh

Old Ratio of Ravi, Mukesh Naresh & Yogesh is 2 : 2 : 1 : 1

New ratio of Ravi, Naresh & Yogesh is  1 : 1 : 1

Ravi’s gain = `1/3-2/6=(2-2)/6=0/6`

Naresh’s gain = `1/3-1/6=(2-1)/6=1/6`

Gaining ratio Naresh & Yogesh is `1/6:1/6` ie., 1 : 1

2. Calculation of Partner’s share in Goodwill of the firm

Goodwill of the firm = ₹ 90,000

Mukesh share in goodwill = `90,000xx2/6` = ₹ 30,000

Naresh’s share = `30,000xx1/2` = ₹ 15,000

Yogesh’s share = `30,000xx1/2` = ₹ 15,000