Question
X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2, decided to share future profits and losses equally with effect from 1st April, 2019. On that date, the goodwill appeared in the books at ₹ 12,000. But it was revalued at ₹ 30,000. Pass Journal entries assuming that goodwill will not appear in the books of account.
Solution
Journal
Date 
Particulars 
L.F. 
Debit Amount (₹) 
Credit Amount (₹) 

2019 






Y’s Capital A/c 
Dr. 

3,600 


Z’s Capital A/c 
Dr. 

2,400 


To Goodwill A/c 



12,000 

(Goodwill written off) 




2019 
Y’s Capital A/c 
Dr. 

1,000 

April 1 
Z’s Capital A/c 
Dr. 

4,000 


To X’s Capital A/c 


5,000 


(Amount of goodwill adjusted on change in profit sharing ratio) 



Working Notes:
WN 1 Calculation of Sacrificing (or Gaining) Ratio
Old Ratio (X, Y and Z) = 5 : 3 : 2
New Ratio (X, Y and Z) = 1 : 1 : 1
Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio
X's share = `5/10  1/3 = (1510)/30 = 5/10` (sacrifice)
Y's share = `3/10  1/3 = (910)/30 = (1)/30` (gain)
Z's share = `2/10  1/3 = (610)/30 = (4)/30` (gain)
WN 2 Writing off of Old Goodwill
X's share = `12,000 xx 5/10` = Rs 6,000
Y's share = `12,000 xx 3/10` = Rs 3,600
Z's share = `12,000 xx 5=2/10` = Rs 2,400
WN 3 Adjustment of Goodwill
Amount to be credited tp X's capital A/c = `30,000 xx 5/30`(share of sacrifice)
= Rs 5,000
Amount to be debited tp Y's capital A/c = `30,000 xx 1/30`(share of gain)
= Rs 1,000
Amount to be debited to Z's capital A/c = `30,000 xx 4/30`(share of gain)
= Rs 4,000