X, Y and Z are partners sharing profits in the ratio of 3 : 2 : 1. Goodwill is appearing in the books at a value of ₹ 60,000. Y retires and at the time of Y's retirement, goodwill is valued at ₹ 84,000. X and Z decided to share future profits in the ratio of 2 : 1. Pass the necessary Journal entries through Goodwill Account.
Solution
Journal
Date 
Particulars 
L.F. 
Debit Amount (Rs) 
Credit Amount (Rs) 


X’s Capital A/c 
Dr. 

30,000 


Y’s Capital A/c 
Dr. 

20,000 


Z’s Capital A/c 
Dr. 

10,000 


To Goodwill A/c 



60,000 

(Goodwill written off) 






Dr. 

14,000 


X’s Capital A/c 
Dr. 

14,000 


Z’s Capital A/c 



28,000 

To Y’s Capital A/c 





(Adjustment of Y’s share of goodwill) 




Working Notes:
WN1:Calculation of Gaining Ratio
`"X : Y : Z" = 3 : 2 : 1` (Old ratio)
`"X : Z" = 2 : 1` (New ratio)
Gaining ratio = New ratio  old ratio
X's gain = `2/3  3/6 = 1/6`
Z's Gain = `1/3  1/6 = 1/6`
`"X : Z" = 1 : 1`
WN2: Calculation of Retiring Partner’s Share of Goodwill
Y's share of goodwill will be brought by X and Z in their gaining ratio `1: 1`
Therefore, X's Capital A/c will be debited with `28,000 xx 1/2 = "Rs" 14,000`
And, Y's Capital A/c will be debited with `28,000 xx 1/2 = "Rs" 14,000`