A, B and C shared profits and losses in the ratio of 3 : 2 : 1 respectively. With effect from 1st April, 2019, they agreed to share profits equally. The goodwill of the firm was valued at ₹ 18,000. Pass necessary Journal entries when: (a) Goodwill is adjusted through Partners' Capital Accounts; and (b) Goodwill is raised and written off.
Calculation of Gain/Sacrifice made by the partners:
Particulars
A
B
C
Old Ratio
3/6
2/6
1/6
New Ratio
1/3
1/3
1/3
Gain/Sacrifice
1/6 (Sacrifice)
Nil
-1/6 (Gain)
Case a)
Journal
Date
Particular
L.F.
Debit Amount
(₹)
Credit Amount
(₹)
2019
April 1
C’s Capital A/c (18,000×1/6)
Dr.
3,000
To A’s Capital A/c (18,000×1/6)
3,000
(Being Adjustment for goodwill)
Case b)
Journal
Date
Particular
L.F.
Debit Amount
(₹)
Credit Amount
(₹)
2019
April 1
Goodwill A/c
Dr.
18,000
To A’s Capital A/c (18,000×3/6)
9,000
To B’s Capital A/c (18,000×2/6)
6,000
To C’s Capital A/c (18,000×1/6)
3,000
(Being goodwill raised in the books)
A’s Capital A/c (18,000×1/3)
Dr.
6,000
B’s Capital A/c (18,000×1/3)
Dr.
6,000
C’s Capital A/c (18,000×1/3)
Dr.
6,000
To Goodwill A/c
18,000
(Being goodwill so raised written off)
Calculation of Gain/Sacrifice made by the partners:
|
Particulars |
A |
B |
C |
|
Old Ratio |
3/6 |
2/6 |
1/6 |
|
New Ratio |
1/3 |
1/3 |
1/3 |
|
Gain/Sacrifice |
1/6 (Sacrifice) |
Nil |
-1/6 (Gain) |
Case a)
|
Journal |
|||||
|
Date |
Particular |
L.F. |
Debit Amount |
Credit Amount |
|
|
2019 April 1 |
C’s Capital A/c (18,000×1/6) |
Dr. |
3,000 |
||
|
|
To A’s Capital A/c (18,000×1/6) |
3,000 |
|||
|
|
(Being Adjustment for goodwill) |
||||
Case b)
|
Journal |
|||||
|
Date |
Particular |
|
L.F. |
Debit Amount |
Credit Amount |
|
2019 |
|
||||
|
April 1 |
Goodwill A/c |
Dr. |
18,000 |
||
|
|
To A’s Capital A/c (18,000×3/6) |
|
9,000 |
||
|
|
To B’s Capital A/c (18,000×2/6) |
|
6,000 |
||
|
|
To C’s Capital A/c (18,000×1/6) |
|
3,000 |
||
|
|
(Being goodwill raised in the books) |
|
|||
|
|
|
||||
|
|
A’s Capital A/c (18,000×1/3) |
Dr. |
6,000 |
||
|
|
B’s Capital A/c (18,000×1/3) |
Dr. |
6,000 |
||
|
|
C’s Capital A/c (18,000×1/3) |
Dr. |
6,000 |
||
|
|
To Goodwill A/c |
|
18,000 |
||
|
|
(Being goodwill so raised written off) |
|
|||
