TS Grewal Solutions for Class 12 Accountancy Vol 1 Chapter 6
TS Grewal Solutions for Class 12 Accountancy Chapter 6 – Retirement/Death of a Partner is a fundamental concept to be learned by the students. Here, we have provided TS Grewal Accountancy solutions for class 12 in a simple and a step by step method, which is beneficial for the students to score well in their upcoming board exams.
Board  CBSE 
Class  Class 12 
Subject  Accountancy 
Chapter  Chapter 6 
Chapter Name  Retirement/Death of a Partner 
Number of questions solved  06 
Category  TS Grewal 
Chapter 6 – Retirement/Death of a Partner explains the belowmentioned concepts:
 Adjustment for Revaluation of Assets and Liabilities
 New profit sharing and gaining ratio
 Adjustment of the partners capital and death of a partner
 Treatment of Goodwill
Question 1
A, B and C were partners sharing profits in the ratio of \(\frac{1}{2}\), \(\frac{2}{5}\) and \(\frac{1}{10}\). Find the new ratio of the remaining partners if C retires.
Solution:
Old Ratio A : B :C = \(\frac{1}{2}\) : \(\frac{2}{5}\) : \(\frac{1}{10}\) or 5 : 4 : 1
Since there is no information on how A and B acquired C’s profit share after his retirement. So, A and B new profit sharing ratio will be evaluated by crossing out C’s share.
Aâ€™s share = \(\frac{1}{2}\) X \(\frac{5}{5}\) = \(\frac{5}{10}\)
Bâ€™s share = \(\frac{2}{5}\) X \(\frac{2}{2}\) = \(\frac{4}{10}\)
Therefore, the new profir ratio of A : B will be 5 : 4
Question 2
From the following particulars, calculate the new profitsharing ratio of the partners:
(a) Shiv, Mohan and Hari were partners in a firm sharing profits in the ratio of 5: 5: 4. Mohan retired and his share was divided equally between Shiv and Hari.
(b) P, Q and R were partners sharing profits in the ratio of 5: 4: 1. P retires from the firm.
Solution:
(a) Old Ratio Shiv: Mohan: Hari = 5: 5 :4
The profit share of Mohan = \(\frac{5}{14}\)
Mohan share equally divided between Shiv and Hari 1: 1
Mohan share taken by Shiv = \(\frac{5}{14}\) X \(\frac{1}{2}\) = \(\frac{5}{28}\)
Mohan share taken by Hari = \(\frac{5}{14}\) X \(\frac{1}{2}\) = \(\frac{5}{28}\)
New Profit Share = Old profit share + Shares taken by Mohan
Shivâ€™s new share = \(\frac{5}{14}\) + \(\frac{5}{28}\) = \(\frac{10+5}{28}\) = \(\frac{15}{28}\)
Hariâ€™s new share = \(\frac{4}{14}\) + \(\frac{5}{28}\) = \(\frac{8+5}{28}\) = \(\frac{13}{28}\)
Shiv and Hari new profit ratio = 15 : 13
(b) P : Q : R old share 5 : 4 : 1
Pâ€™s profit share \(\frac{5}{10}\)
Since, no information on how Q and R acquired P’s profit share after his retirement, so Q and R new profit sharing ratio is evaluated just by crossing out Pâ€™s share.
Therefore, New Profit Ratio Q: R = 4:1
Question 3
R, S and M are partners sharing profits in the ratio of 2/5, 2/5 and 1/5. M decides to retire from the business and his share is taken by R and S in the ratio of 1: 2. Calculate the new profitsharing ratio.
Solution:
Old Ratio R: S: M = 2: 2: 1
M retires from the company.
Mâ€™s profit share = \(\frac{1}{5}\)
Râ€™s and Sâ€™s share taken by M in ratio 1: 2
Share taken by R = \(\frac{1}{5}\) X \(\frac{1}{3}\) = \(\frac{1}{15}\)
Share taken by S= \(\frac{1}{5}\) X \(\frac{2}{3}\) = \(\frac{2}{15}\)
New Ratio = Old Ratio + Share taken from M
Râ€™s new share = \(\frac{2}{5}\) + \(\frac{1}{15}\) = \(\frac{6+1}{15}\) = \(\frac{7}{15}\)
Sâ€™s new share = \(\frac{2}{5}\) + \(\frac{2}{15}\) = \(\frac{6+2}{15}\) = \(\frac{8}{15}\)
R and S new profit ratio = 7 : 8
Question 4
A, B and C were partners sharing profits in the ratio of 4 : 3 : 2. A retires, assuming B and C will share profits in the ratio of 2 : 1. Determine the gaining ratio.
Solution:
Old ratio A : B : C = 4 : 3 : 2
New ratio B : C = 2 : 1
Gaining ratio = New ratio – Old ratio
Bâ€™s Gaining ratio = \(\frac{2}{3}\) – \(\frac{3}{9}\) = \(\frac{6}{9}\) – \(\frac{3}{9}\) = \(\frac{3}{9}\)
Câ€™s Gaining ratio = \(\frac{1}{3}\) – \(\frac{2}{9}\) = \(\frac{3}{9}\) – \(\frac{2}{9}\) = \(\frac{1}{9}\)
So, Gaining ratio B : C = 3 : 1
Question 5
X, Y and Z are partners sharing profits in the ratio of \(\frac{1}{2}\), \(\frac{3}{10}\), and \(\frac{1}{5}\). Calculate the gaining ratio of remaining partners when Y retires from the firm.
Solution:
Old ratio X: Y: Z = \(\frac{1}{2}\) : \(\frac{3}{10}\) : \(\frac{1}{5}\) = \(\frac{5 : 3 : 2}{10}\)
After Yâ€™s retirement the ratio of X and Z would be 5 : 2
Gaining ratio = New ratio – Old ratio
Xâ€™s Gaining ratio = \(\frac{5}{7}\) – \(\frac{5}{10}\) = \(\frac{15}{70}\)
Zâ€™s Gaining ratio = \(\frac{2}{7}\) – \(\frac{2}{10}\) = \(\frac{6}{70}\)
Gaining ratio of X and Z will be = \(\frac{15}{70}\) : \(\frac{6}{70}\) = \(\frac{15 : 6}{70}\) or 5: 2
Question 6
(a) W, X, Y and Z are partners sharing profits and losses in the ratio of 1/3, 1/6, 1/3 and 1/6 respectively. Y retires and W, X and Z decide to share the profits and losses equally in future.
Calculate gaining ratio.
(b) A, B, and C are partners sharing profits and losses in the ratio of 4: 3: 2. C retires from the business. A is acquiring 4/9 of C’s share and balance is acquired by B. Calculate the new profitsharing ratio and gaining ratio.
Solution:
(a) Old ratio W: X: Y: Z = \(\frac{1}{3}\) : \(\frac{1}{6}\) : \(\frac{1}{3}\) : \(\frac{1}{6}\) or 2: 1: 2: 1
New ratio W: X: Z = 1: 1: 1
Gaining ratio = New ratio – Old ratio
Wâ€™s Gaining ratio = \(\frac{1}{3}\) – \(\frac{2}{6}\) = \(\frac{22}{6}\) = 0
Xâ€™s Gaining ratio = \(\frac{1}{3}\) – \(\frac{1}{6}\) = \(\frac{21}{6}\) = \(\frac{1}{6}\)
Zâ€™s Gaining ratio = \(\frac{1}{3}\) – \(\frac{1}{6}\) = \(\frac{21}{6}\) = \(\frac{1}{6}\)
So, Gaining ratio = 0: 1: 1
(b) Old Ratio A: B: C = 4 : 3 : 2
Profit Share of Câ€™s = \(\frac{2}{9}\) \(\frac{4}{9}\) of Câ€™s share is acquired by A and the left share is acquired by B
A acquired share = \(\frac{2}{9}\) X \(\frac{4}{9}\) = \(\frac{8}{81}\)
B acquired share = Câ€™s share – Share acquired by A
= \(\frac{2}{9}\) – \(\frac{8}{81}\) = \(\frac{10}{81}\)
Aâ€™s new share = \(\frac{4}{9}\) + \(\frac{8}{81}\) = \(\frac{36+8}{81}\) = \(\frac{44}{81}\)
Bâ€™s new share = \(\frac{3}{9}\) + \(\frac{10}{81}\) = \(\frac{27+10}{81}\) = \(\frac{37}{81}\)
So, A and B new ratio will be = 44: 37
Gaining ratio = New ratio – Old ratio
Aâ€™s Gaining ratio = \(\frac{44}{81}\) – \(\frac{4}{9}\) = \(\frac{4436}{81}\) = \(\frac{8}{81}\)
Bâ€™s Gaining ratio = \(\frac{37}{81}\) – \(\frac{3}{9}\) = \(\frac{3727}{81}\) = \(\frac{10}{81}\)
So, Gaining ratio will be = 8: 10 or 4: 5
Question 7
Kumar, Lakshya, Manoj and Naresh are partners sharing profits in the ratio of 3 : 2 : 1 : 4. Kumar retires and his share is acquired by Lakshya and Manoj in the ratio of 3 : 2. Calculate new profitsharing ratio and gaining ratio of the remaining partners.
Solution:
\(\frac{3}{10}\) of Kumarâ€™s share acquired by Lakshya and Manoj in 3: 2 ratioLakshya acquired share = \(\frac{3}{10}\) X \(\frac{3}{5}\) = \(\frac{9}{50}\)
Manoj acquired share = \(\frac{3}{10}\) X \(\frac{2}{5}\) = \(\frac{6}{50}\)
Lakshya new share = \(\frac{2}{10}\) + \(\frac{9}{50}\) = \(\frac{19}{50}\)
Manoj new share = \(\frac{1}{10}\) + \(\frac{6}{50}\) = \(\frac{11}{50}\)
Naresh retained share = \(\frac{4}{10}\) or \(\frac{20}{50}\)
The new profit sharing ratio between Manoj, Lakshya, and naresh will be 19: 11: 20
Question 8
A, B, and C were partners in a firm sharing profits in the ratio of 8 : 4 : 3. B retires and his share is taken up equally by A and C. Find the new profitsharing ratio
Solution:
Old Ratio A: B: C = 8 : 4 : 3
B retires from the firm and his profit share is = \(\frac{4}{15}\)
A and C took Bâ€™s share in 1 : 1 ratio
A acquired share = \(\frac{4}{15}\) X \(\frac{1}{2}\) = \(\frac{4}{30}\) = \(\frac{2}{15}\)
C acquired share = \(\frac{4}{15}\) X \(\frac{1}{2}\) = \(\frac{4}{30}\) = \(\frac{2}{15}\)
New Ratio = Old ratio + Share acquired from B
Aâ€™s new share = \(\frac{8}{15}\) + \(\frac{2}{15}\) = \(\frac{10}{15}\)
Bâ€™s new share = \(\frac{3}{15}\) + \(\frac{2}{15}\) = \(\frac{5}{15}\)
New profit sharing ratio between A and C is \(\frac{10}{15}\) : \(\frac{5}{15}\) or 2: 1
Question 9
A, B, and C are partners sharing profits in the ratio of 5 : 3 : 2. C retires and his share is taken by A. Calculate new profitsharing ratio of A and B.
Solution:
Old Ratio A: B: C = 5 : 3 : 2
C retires from the firm and profit share is \(\frac{2}{10}\)
A acquires entire Câ€™s share
New Ratio = Old Ratio + Share acquired from C
Aâ€™s new ratio = \(\frac{5}{10}\) + \(\frac{2}{10}\) = \(\frac{7}{10}\)
Bâ€™s = \(\frac{3}{10}\)
So, the new ratio between A: B will be 7: 3
Question 10
P, Q and R are partners sharing profits in the ratio of 7 : 5 : 3. P retires and it is decided that the profitsharing ratio between Q and R will be the same as existing between P and Q. Calculate New profitsharing ratio and Gaining Ratio.
Solution:
Old Ratio = P: Q : R = 7: 5: 3
New ratio between Q: R = 7: 5
Gaining Ratio = New Ratio – Old Ratio
Qâ€™s Gaining ratio = \(\frac{7}{12}\) – \(\frac{5}{15}\) = \(\frac{35 – 20}{60}\) = \(\frac{15}{60}\)
Râ€™s Gaining ratio = \(\frac{5}{12}\) – \(\frac{3}{15}\) = \(\frac{25 12}{60}\) = \(\frac{13}{60}\)
So, Gaining ratio will be = 15: 13
Question 11
Murli, Naveen and Omprakash are partners sharing profits in the ratio of 3/8, 1/2 and 1/8. Murli retires and surrenders 2/3rd of his share in favour of Naveen and remaining share in favour of Omprakash. Calculate new profitsharing ratio and gaining ratio of the remaining partners.
Solution:
Old Ratio=3: 4: 1
Muraliâ€™s retires with share \(\frac{3}{8}\) \(\frac{2}{3}\) share is surrendered by Murli in the favour of Naveen
Naveen acquired share = \(\frac{3}{8}\) X \(\frac{2}{3}\) = \(\frac{2}{8}\)
Remaining share acquired by Omprakash = \(\frac{3}{8}\) – \(\frac{2}{8}\) = \(\frac{1}{8}\)
Gaining ratio = \(\frac{2}{8}\) : \(\frac{1}{8}\) = 2:1
New Ratio = Old ratio + Share acquired from B
Naveen new share = \(\frac{4}{8}\) + \(\frac{2}{8}\) = \(\frac{6}{8}\)
Omprakash new share = \(\frac{1}{8}\) + \(\frac{1}{8}\) = \(\frac{2}{8}\)
New profit sharing ratio between Naveen and Omprakash will be \(\frac{6}{8}\) : \(\frac{2}{8}\) = 3: 1
Question 12
A, B and C are partners in a firm sharing profits and losses in the ratio of 4 : 3 : 2. B decides to retire from the firm. Calculate new profitsharing ratio of A and C in the following circumstances:
(a) If B gives his share to A and C in the original ratio of A and C.
(b) If B gives his share to A and C in equal proportion.
(c) If B gives his share to A and C in the ratio of 3 : 1.
(d) If B gives his share to A only.
Solution:
Old Ratio A: B: C = 4 : 3 : 2
B retires from the firm and his profit share is = \(\frac{3}{9}\)
(a) If B gives his share to A and C in the original ratio of A and C
Original ratio A : C = 4 : 2
A acquired share = \(\frac{3}{9}\) X \(\frac{4}{6}\) = \(\frac{12}{54}\)
C acquired share = \(\frac{3}{9}\) X \(\frac{2}{6}\) = \(\frac{6}{54}\)
New ratio = Old ratio + Share acquired from B
Aâ€™s new share = \(\frac{4}{9}\) + \(\frac{12}{54}\) = \(\frac{24+12}{54}\) = \(\frac{36}{54}\)
Câ€™s new share = \(\frac{2}{9}\) + \(\frac{6}{54}\) = \(\frac{12+6}{54}\) = \(\frac{18}{54}\)
New profit sharing ratio between A and C = \(\frac{36}{54}\) : \(\frac{18}{54}\) or 2: 1
(b) If B gives his share to A and C in equal proportion
A acquired share = \(\frac{3}{9}\) X \(\frac{1}{2}\) = \(\frac{3}{18}\)
C acquired share = \(\frac{3}{9}\) X \(\frac{1}{2}\) = \(\frac{3}{18}\)
New ratio = Old ratio + Share acquired from B
Aâ€™s new share = \(\frac{4}{9}\) + \(\frac{3}{18}\) = \(\frac{8+3}{18}\) = \(\frac{36}{54}\)
Câ€™s new share = \(\frac{2}{9}\) + \(\frac{3}{18}\) = \(\frac{4+3}{18}\) = \(\frac{7}{18}\)
New profit sharing ratio between A and C = 11: 7
(c) If B gives his share to A and C in the ratio of 3 : 1
A acquired share = \(\frac{3}{9}\) X \(\frac{3}{4}\) = \(\frac{9}{36}\)
C acquired share = \(\frac{3}{9}\) X \(\frac{1}{4}\) = \(\frac{3}{36}\)
New ratio = Old ratio – Share acquired from B
Aâ€™s new share = \(\frac{4}{9}\) – \(\frac{9}{36}\) = \(\frac{16+9}{36}\) = \(\frac{25}{36}\)
Câ€™s new share = \(\frac{2}{9}\) – \(\frac{3}{36}\) = \(\frac{8+3}{36}\) = \(\frac{11}{36}\)
New profit sharing ratio between A and C = 25 : 11
(d) If B gives his share to A only
Aâ€™s new share = Old share of A + Share of B
= \(\frac{4}{9}\) + \(\frac{3}{9}\) = \(\frac{7}{9}\)
Câ€™s new share = \(\frac{2}{9}\)
New profit sharing ratio between A and C = 7 : 2
Question 13
L, M and O are partners sharing profits and losses in the ratio of 4 : 3 : 2. M retires and the goodwill is valued at â‚¹ 72,000. Calculate M’s share of goodwill and pass the Journal entry for Goodwill. L and O decided to share the future profits and losses in the ratio of 5 : 3.
Solution:
Journal 

Particulars 
L.F. 
Debit â‚¹ 
Credit â‚¹ 

Lâ€™s Capital A/c 
Dr. 
13,000 

Oâ€™s Capital A/c 
Dr. 
11,000 

To Mâ€™s Capital A/c (Being adjustment of Mâ€™s goodwill share) 
24,000 
Working Note 1: Gaining Ratio Evaluation
Old Ratio L : M : O = 4 : 3 : 2
M retires from the firm
New Ratio between L : O = 5 : 3
Gaining Ratio
New Ratio âˆ’ Old Ratio
Lâ€™s share = \(\frac{5}{8}\) – \(\frac{4}{9}\) = \(\frac{4532}{72}\) = \(\frac{13}{72}\)
Oâ€™s share = \(\frac{3}{8}\) – \(\frac{2}{9}\) = \(\frac{2716}{72}\) = \(\frac{11}{72}\)
Gaining ratio between L and O = 13: 11
Working Note 2: Goodwill Evaluation
Firmâ€™s Goodwill = â‚¹ 72,000
Mâ€™s goodwill= 72,000 X \(\frac{3}{9}\) = â‚¹ 24,000
This goodwill share will be debited from remaining Partnersâ€™ Capital A/c in 13 : 11 gaining ratio
Debited amount from Lâ€™s Capital A/c = 24,000 X \(\frac{13}{24}\) = â‚¹ 13,000
Debited amount from Oâ€™s Capital A/c = 24,000 X \(\frac{131}{24}\) = â‚¹ 11,000
Question 14
P, Q, R and S were partners in a firm sharing profits in the ratio of 5 : 3 : 1 : 1. On 1st January, 2019, S retired from the firm. On S’s retirement, goodwill of the firm was valued at â‚¹ 4,20,000. New profitsharing ratio among P, Q and R will be 4 : 3 : 3.
Showing your working notes clearly, pass necessary Journal entry for the treatment of goodwill in the books of the firm on S’s retirement.
Solution:
Journal 

Date 
Particulars 
L.F. 
Debit â‚¹ 
Credit â‚¹ 

1st Jan. 
Râ€™s Capital A/c 
Dr. 
84,000 

To Pâ€™s Capital A/c 
42,000 

To Sâ€™s Capital A/c 
42,000 

(Being goodwill adjusted) 
Working Notes 1: Gaining Ratio Evaluation
Gaining Ratio = New Ratio â€“ Old Ratio
Pâ€™s share = \(\frac{4}{10}\) – \(\frac{5}{10}\) = – \(\frac{1}{10}\) (Sacrificing)
Qâ€™s share = \(\frac{3}{10}\) – \(\frac{3}{10}\) = 0
Râ€™s share = \(\frac{3}{10}\) – \(\frac{1}{10}\) = \(\frac{2}{10}\)
Working Note 2: Goodwill Evaluation
Pâ€™s Goodwill share = 4,20,000 X \(\frac{1}{10}\) = â‚¹ 42,000
Qâ€™s Goodwill share = 4,20,000 X \(\frac{2}{10}\) = â‚¹ 84,000
Râ€™s Goodwill share = 4,20,000 X \(\frac{1}{10}\) = â‚¹ 42,000
Question 15
Aparna, Manisha and Sonia are partners sharing profits in the ratio of 3 : 2 : 1. Manisha retired and the goodwill of the firm is valued at â‚¹ 1,80,000. Aparna and Sonia decided to share future profits in the ratio of 3 : 2. Pass necessary Journal entries.
Solution:
Journal 

Date 
Particulars 
L.F. 
â‚¹ 
â‚¹ 

Aparnaâ€™s Capitals A/c 
Dr. 
18,000 

Soniaâ€™s Capital A/c 
Dr. 
42,000 

To Manishaâ€™s Capital A/c 
60,000 

(Being Manishaâ€™s goodwill share adjusted to Aparnaâ€™s and Soniaâ€™s Capital A/c as per their gaining ratio) 
Working Notes 1: Manishaâ€™s Goodwill Share Evaluation
Manisha’s share = Firm’s Goodwill X Manisha’s Profit Share
Manisha’s share=1,80,000 X \(\frac{1}{3}\) = â‚¹ 60,000
Working Notes 1: Gaining Ratio Evaluation
Gaining ratio = New Ratio â€“ Old Ratio
Arpanaâ€™s gain = \(\frac{3}{5}\) – \(\frac{3}{6}\) = \(\frac{3}{10}\)
Soniaâ€™s gain = \(\frac{2}{5}\) – \(\frac{1}{6}\) = \(\frac{7}{30}\)
Gaining ratio = 3:7
Working Note 2: Goodwill Evaluation
Arpanaâ€™s Goodwill share = 60,000 X \(\frac{3}{10}\) = â‚¹ 18,000
Soniaâ€™s Goodwill share = 60,000 X \(\frac{7}{10}\) = â‚¹ 42,000
Question 16
A, B and C are partners sharing profits in the ratio of 3 : 2 : 1. B retired and the new profitsharing ratio between A and C was 2 : 1. On B’s retirement, the goodwill of the firm was valued at â‚¹ 90,000. Pass necessary Journal entry for the treatment of goodwill on B’s retirement.
Solution:
Journal 

Particulars 
L.F. 
Debit â‚¹ 
Credit â‚¹ 

Aâ€™s Capital A/c 
Dr. 
15,000 

Câ€™s Capital A/c 
Dr. 
15,000 

To Bâ€™s Capital A/s 
30,000 

(Being adjustment made on Bâ€™s goodwill share) 
Working Notes 1: Gaining Ratio Evaluation
Old Ratio A: B: C = 3 : 2 : 1
B retires from the firm.
New Ratio A : C = 2 : 1
Gaining Ratio = New Ratio âˆ’ Old Ratio
Aâ€™s share = \(\frac{2}{3}\) – \(\frac{3}{6}\) = \(\frac{43}{6}\) = \(\frac{1}{6}\)
Câ€™s share = \(\frac{1}{3}\) – \(\frac{1}{6}\) = \(\frac{21}{6}\) = \(\frac{1}{6}\)
Gaining ratio = 1:1
Working Notes 2 : Goodwill Adjustment
Form Goodwill = â‚¹ 90,000
Bâ€™s Goodwill share = 90,000 X \(\frac{2}{6}\) = â‚¹ 30,000
This goodwill share will be debited from remaining Partnersâ€™ Capital A/c in 1:1 gaining ratio
Debited amount from Aâ€™s Capital A/c = 30,000 X \(\frac{1}{2}\) = â‚¹ 15,000
Debited amount from Câ€™s Capital A/c = 30,000 X \(\frac{1}{2}\) = â‚¹ 15,000
Question 17
Hanny, Pammy and Sunny are partners sharing profits in the ratio of 3 : 2 : 1. Goodwill is appearing in the books at a value of â€‹â‚¹ 60,000. Pammy retires and at the time of Pammy’s retirement, goodwill is valued at â‚¹ 84,000. Hanny and Sunny decided to share future profits in the ratio of 2 : 1. Record the necessary Journal entries.
Solution:
Journal 

Date 
Particulars 
L.F. 
Debit â‚¹ 
Credit â‚¹ 

Hannyâ€™s Capital A/c 
Dr. 
30,000 

Pammyâ€™s Capital A/c 
Dr. 
20,000 

Sunnyâ€™s Capital A/c 
10,000 

To Goodwill A/c 
60,000 

(Being writtenoff old goodwill in old ratio) 

Hannyâ€™s Capital A/c 
Dr. 
14,000 

Sunnyâ€™s Capital A/c 
Dr. 
14,000 

To Pammyâ€™s Capital A/c 
28,000 

(Being goodwill adjustment in gaining ratio) 
Working Notes 1: Pammyâ€™s Goodwill Share Evaluation
Pammyâ€™s share = Goodwill of the firm X Pammy’s Profit Share
= 84,000 X \(\frac{2}{6}\) = â‚¹ 28,000 (to be borne by gaining partners in gaining ratio)
Working Notes 2: Gaining Ratio Evaluation
Harryâ€™s gaining ratio = \(\frac{3}{5}\) – \(\frac{3}{6}\) = \(\frac{1}{6}\)
Sunnyâ€™s gaining ratio = \(\frac{1}{3}\) – \(\frac{1}{6}\) =\(\frac{1}{6}\)
Gaining Ratio = 1:1
Question 18
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 â‚¹ 60,000. Y retires and at the time of Y’s retirement, goodwill is valued at â‚¹ 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 â‚¹ 
Credit â‚¹ 

Xâ€™s Capital A/c 
Dr. 
30,000 

Yâ€™s Capital A/c 
Dr. 
20,000 

Zâ€™s Capital A/c 
Dr. 
10,000 

To Goodwill A/c Being goodwill written off) 
60,000 

Xâ€™s Capital A/c 
Dr. 
14,000 

Zâ€™s Capital A/c 
Dr. 
14,000 
28,000 

To Yâ€™s Capital A/c 
28,000 

(Being goodwill adjustment of Y) 
Working Notes 1 : Gaining Ratio Evaluation
Old Ratio X : Y : Z = 3 : 2 : 1
New Ratio X : Z = 2 : 1
Gaining Ratio = New Ratio – Old Ratio
Xâ€™s gaining ratio = \(\frac{2}{3}\) – \(\frac{3}{6}\) = \(\frac{1}{6}\)
Zâ€™s gaining ratio = \(\frac{1}{3}\) – \(\frac{1}{6}\) = \(\frac{1}{6}\)
Gaining ratio of X and Z = 1 : 1
Working Notes 2 : Goodwill Share Evaluation in 3:2:1 ratio
X’s share of goodwill=84,000 x \(\frac{3}{6}\) = â‚¹ 42,000
Y’s share of goodwill=84,000 x \(\frac{2}{6}\) = â‚¹ 28,000
Z’s share of goodwill=84,000 x \(\frac{1}{6}\) = â‚¹ 14,000
Working Notes 3 : Retiring Partnerâ€™s Goodwill Share Evaluation
X and Z will acquire the goodwill share of Y in 2 :1 gaining ratio
Debited amount from X’s Capital A/c = 84,000 X \(\frac{2}{3}\) = â‚¹ 56,000
Debited amount from Zâ€™s Capital A/c = 84,000 X \(\frac{1}{3}\) = â‚¹ 28,000
Question 19
A, B and C are partners sharing profits in the ratio of \(\frac{4}{9}\) : \(\frac{3}{9}\) : \(\frac{2}{9}\). B retires and his capital after making adjustments for reserves and gain (profit) on revaluation stands at â‚¹ 1,39,200. A and C agreed to pay him â‚¹ 1,50,000 in full settlement of his claim. Record necessary Journal entry for adjustment of goodwill if the new profitsharing ratio is decided at 5 : 3.
Solution:
Journal 

Date 
Particulars 
L.F. 
Debit â‚¹ 
Credit â‚¹ 

Aâ€™s Capital A/c 
Dr. 
5,850 

Câ€™s Capital A/c 
Dr. 
4,950 

To Bâ€™s Capital A/c 
10,800 

(Being goodwill adjustment of B) 
Working Notes 1 : Bâ€™s Goodwill Share Evaluation
Profit sharing ratio of A: B: C = \(\frac{4}{9}\) : \(\frac{3}{9}\) : \(\frac{2}{9}\)
B retires from the firm and other partners agreed to pay him â‚¹ 1,50,000
After making necessary adjustments Bâ€™s capital amounting â‚¹1,39,200
Hidden goodwill = 1,50,000 â€“ 1,39,200 = â‚¹ 10,800
Working Notes 2 : Gaining Ratio Evaluation
New profit sharing ratio between A : B is 5 : 3
Gaining Ratio = New Ratio – Old Ratio
Aâ€™s gaining ratio = \(\frac{5}{8}\) – \(\frac{4}{9}\) = \(\frac{13}{72}\)
Câ€™s gaining ratio = \(\frac{3}{8}\) – \(\frac{2}{9}\) = \(\frac{11}{72}\)
Gaining ratio of A and C= 13 : 11
Working Notes 3 : Bâ€™s Goodwill Share Evaluation
A and C will acquire the goodwill share of B in 13 :11 gaining ratio
Debited amount from A’s Capital A/c = 10,800 X \(\frac{13}{24}\) = â‚¹ 5,850
Debited amount from Câ€™s Capital A/c = 10,800 X \(\frac{11}{24}\) = â‚¹ 4,950
Question 20
M, N and O are partners in a firm sharing profits in the ratio of 3 : 2 : 1. Goodwill has been valued at â‚¹ 60,000. On N’s retirement, M and O agree to share profits equally. Pass the necessary Journal entry for treatment of N’s share of goodwill.
Solution:
Journal 

Date 
Particulars 
L.F. 
Debit â‚¹ 
Credit â‚¹ 

Oâ€™s Capital A/c 
Dr. 
20,000 

To Nâ€™s Capital A/c 
20,000 

(Being adjustment of Nâ€™s goodwill share) 
Working Notes 1 : Gaining Ratio Evaluation
Old Ratio M : N : O = 3 : 2 : 1
New Ratio M : O =1:1
Gaining Ratio = New Ratio – Old Ratio
Mâ€™s gaining ratio = \(\frac{1}{2}\) – \(\frac{3}{6}\) = \(\frac{33}{6}\) = 0
Oâ€™s gaining ratio = \(\frac{1}{2}\) – \(\frac{1}{6}\) = \(\frac{31}{6}\) = \(\frac{2}{6}\)
Gaining ratio is only received by O in \(\frac{2}{6}\) ratio
Working Notes 2 : Retiring Partnerâ€™s Goodwill Share Evaluation
Goodwill share of N = 60,000 X \(\frac{2}{6}\) = â‚¹ 20,000
N’s share of goodwill will be brought by O only.
So, only O’s Capital Account will be debited with â‚¹ 20,000
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