Question

# A, B and C are partners sharing profits in the ratio of 3 : 2 : 1. B retired and the new profit-sharing ratio between A and C was 2 : 1. On B's retirement, the goodwill of the firm was valued at ₹ 90,000. Pass necessary Journal entry for the treatment of goodwill on B's retirement.

Solution

## Journal Particulars L.F. Debit Amount Rs Credit Amount Rs A’s Capital A/c Dr.   15,000   C’s Capital A/c Dr.   15,000   To B’s Capital A/s     30,000 (Adjustment B’s share of goodwill made)       Working Notes: WN 1 Calculation of Gaining Ratio Old Ratio (A, B and C) = 3 : 2 : 1 B retires from the firm. New Ratio (A and C) = 2 : 1 Gaining RatioNew Ratio − Old Ratio ∴Gaining Ratio = 1 : 1 WN 2 Adjustment of Goodwill Goodwill of the firm = Rs 90,000 B’s share of goodwill This share of goodwill is to be debited to remaining Partners’ Capital Accounts in their gaining ratio (i.e. 1 : 1). AccountancyTS Grewal Vol. I (2019)All

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