Question

A, B, C and D were partners in a firm sharing profits and losses in the ratio of 3 : 2 : 2 : 1. On 1st April, 2018, D retired and the new profit sharing ratio decided was 3 : 1 : 1. On D's retirement the goodwill of the firm was valued at Rs 3,60,000. Pass the necessary Journal entry in the books of the firm at the time of D's retirement.

Answer 1

JOURNAL
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Debit}& \text{Credit}\\ & & & & \text{(Rs)}& \text{(Rs)}\\ & \text{A's Capital A/c}& \text{Dr.}& & 81,000& \\ & \text{To B's Capital A/c}& & & & 18,000\\ & \text{To C's Capital A/c}& & & & 18,000\\ & \text{To D's Capital A/c}& & & & 45,000\\ & \text{(Being amount of goodwill adjusted)}& & & & \end{array}$

Working Notes:

Calculation of Gaining Ratio = New Ratio - Old Ratio

A's gaining = $\frac{3}{5}-\frac{3}{8}=\frac{(24-15)}{40}=\frac{9}{40}$

B's gaining = $\frac{1}{5}-\frac{2}{8}=\frac{(8-10)}{40}=-\frac{2}{40}$

C's gaining = $\frac{1}{5}-\frac{2}{8}=\frac{(8-10)}{40}=-\frac{2}{40}$

Share of goodwill at the time of retirement

D's share of goodwill = $3,60,000\times \frac{1}{8}=Rs45,000$

A's share of goodwill = $3,60,000\times \frac{9}{40}=Rs81,000$

B's share of goodwill = $3,60,000\times \frac{2}{40}=Rs18,000$

C's share of goodwill = $3,60,000\times \frac{2}{40}=Rs18,000$