A, B and C are partners sharing profits in the ratio of 4/9 : 3/9 : 2/9. B retires and his capital after making adjustments for reserves and gain (profit) on revaluation stands at ₹ 1,39,200. A and C agreed to pay him ₹ 1,50,000 in full settlement of his claim. Record necessary Journal entry for adjustment of goodwill if the new profit-sharing ratio is decided at 5 : 3.

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Solution

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit Amount

Rs

A’s Capital A/c

Dr.

5,850

C’s Capital A/c

Dr.

4,950

To B’s Capital A/c

10,800

(Adjustment of B’s share of goodwill)

Working Notes

i. Calculation of B’s share of goodwill

A, B and C are sharing profits in ratio 4/9 : 3/9 : 2/9

B retires from the firm. Remaining partners agreed to pay him Rs 1,50,000

B’s capital after making necessary adjustments Rs 1,39,200

Therefore, Hidden Goodwill is Rs (1,50,000 – 1,39,200) i.e. Rs 10,800

ii Gaining Ratio

New profit sharing ratio between A and B is 5:3

Thus, B’s share of goodwill will be brought in by A and C in the gaining ratio 13:11 i.e.

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A, B

and

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are partners sharing profits in the ratio of

\frac{4}{9} : \frac{3}{9} : \frac{2}{9}

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retired and his capital after making adjustment for reserves and gain (profit) on revaluation stands at

R s . 1, 39, 200

A

and

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agreed to pay him

R s . 1, 50, 000

in full settlement of his claim. Record necessary Journal entry for adjustment of goodwill if the new profit-sharing ratio is decided at

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Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	A’s Capital A/c	Dr.		5,850
	C’s Capital A/c	Dr.		4,950
	To B’s Capital A/c				10,800
	(Adjustment of B’s share of goodwill)