Question

A, B and C were partners in a firm sharing profits in the ratio of 1:2:2. On 1st July, 2014, A retired and the new profit sharing ratio of B and C was 3:2. Goodwill already exist in the books amounted to Rs. 1,00,000. Goodwill of the firm was valued at Rs. 4,00,000. Pass necessary entries for the record of goodwill in the above case. Also calculate the gaining ratio.

Answer 1

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Debit}& \text{Credit}\\ & \text{A's Capital A/c}& \text{Dr.}& & \text{20,000}& \\ & \text{B's Capital A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{C's Capital A/c}& \text{Dr.}& & \text{40,000}& \\ & \text{To Goodwill A/c}& & & & 1,00,000\\ & \underset{–}{\text{(Being old goodwill written off in old ratio)}}& & & & \\ & \text{B's Capital A/c}& \text{Dr.}& & 80,000& \\ & \text{To A's Capital A/c}& & & & 80,000\\ & \text{(Being goodwill at the time of retirement is adjusted in gaining ratio)}& & & & \end{array}$

Calcutation of Gaining Ratio = New Ratio - Old Ratio

B's gaining $=\frac{3}{5}-\frac{2}{5}=\frac{1}{5}$

C's gaining $=\frac{2}{5}-\frac{2}{5}=0$

A's share of goodwill $=4,00,000\times \frac{1}{5}=Rs.80,000$