Question

Vimal, Bose and Ghosh were partners in a firm sharing profits and losses equally. On 1st April, 2024, Bose retired from the firm and the new profit sharing ratio between Vimal and Ghosh was decided as 4 : 3. On Bose's retirement, the goodwill of the firm was valued at ₹ 2,10,000. By what amount will the partners' Capital accounts be debited or credited for the treatment of goodwill on Bose's retirement?

Options

• Debit Bose's A/c by ₹ 70,000, Credit Vimal and Ghosh by ₹ 50,000 and ₹ 20,000, respectively.

• Debit Vimal by ₹ 50,000, Debit Ghosh by ₹ 20,000 and Credit Bose by ₹ 70,000.

• Debit Vimal by ₹ 40,000, Debit Ghosh by ₹ 30,000 and Credit Bose by ₹ 70,000.

• Debit Vimal by ₹ 1,20,000, Debit Ghosh by ₹ 90,000 and Credit Bose's A/с by ₹ 2,10,000.

Answer 1

Debit Vimal by ₹ 50,000, Debit Ghosh by ₹ 20,000 and Credit Bose by ₹ 70,000.

Explanation:

Bose's share of goodwill = ₹ 2,10,000 × `1/3` = ₹ 70,000

Old ratio of Vimal and Ghosh = 1 : 1

New ratio = 4 : 3

Gaining ratio:

Vimal's gain = `4/7` − `1/3` = `5/21`

Ghosh's gain = `3/7` − `1/3` = `2/21`

So, gaining ratio = 5 : 2

Therefore, Bose's goodwill of ₹ 70,000 is borne by Vimal and Ghosh in 5 : 2:

• Vimal = ₹ 70,000 × `5/7` = ₹ 50,000
• Ghosh = ₹ 70,000 × `2/7` = ₹ 20,000

So the correct treatment is:

Debit Vimal ₹ 50,000, Debit Ghosh ₹ 20,000 and Credit Bose ₹ 70,000.