Question

Akash, Amber and Gagan were partners in a firm sharing profits and losses in the ratio of 14 : 5 : 6 respectively. Amber retires from the firm and surrenders $\frac{1}{3}$rd of his share in favour of Akash and balance to Gagan. The goodwill of the firm is valued at Rs 60,000. Goodwill already appears in the books at Rs 75,000. The profit for the first year after Amber's retirement was Rs 90,000. Pass necessary Journal entries.

Answer 1

JOURNAL

$\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{L.F.}& \text{Debit}& \text{Credit}\\ & & & \left(\text{Rs}\right)& \left(\text{Rs}\right)\\ & \text{Aksah's Capital A/c}\text{Dr.}& & 42,000& \\ & \text{Amber's Capital A/c}\text{Dr.}& & 15,000& \\ & \text{Gagan's Capital A/c}\text{Dr.}& & 18,000& \\ & \text{To Goodwill A/c}& & & 75,000\\ & \underset{–}{\left(\text{Being goodwill written off}\right)}& & & \\ & \text{Akash's Capital}\text{Dr.}& & 4,000& \\ & \text{Gagan's Capital A/c}\text{Dr.}& & 8,000& \\ & \text{To Amber's Capital A/c}& & & 12,000\\ & \underset{–}{\left(\text{Being Amber's goodwill is distributed in gaining ratio}\right)}& & & \\ & \text{Profit and Loss Appropriation A/c}\text{Dr.}& & 90,000& \\ & \text{To Akash's Capital A/c}& & & 56,400\\ & \text{To Gagan's Capital A/c}& & & 33,600\\ & \left(\text{Being profit distributed in new ratio}\right)& & & \end{array}$

Calculation of Gaining Ratio:

Akash's gain = $\frac{1}{3}\times \frac{5}{25}=\frac{5}{75}$

Ganga's gain =$\frac{5}{25}-\frac{5}{75}=\frac{(15-5)}{75}=\frac{10}{75}$

Goodwill of Amber = $60,000\times \frac{5}{25}=Rs12,000$

New Ratio = Old Ratio + Gaining Ratio

Akash's new ratio = $\frac{14}{25}+\frac{5}{75}=\frac{(42+5)}{75}=\frac{47}{75}$

Ganga's new ratio = $\frac{6}{25}+\frac{10}{75}=\frac{(18-10)}{75}=\frac{28}{75}$

New ratio = 47 : 28.