Question

If the value of goodwill is Rs. 3,00,000. The PSR of A, B and C is 1:1:1. A retires and new profit sharing ratio is 1:1. B and C Capital accounts will be debited with what amount?

• A. None of the above
• B. First all partners capital account are credited in their old ratio & then gaining partners capital accounts are debited in their old ratio
• C. First all partners capital account are credited in their old ratio & then gaining partners capital accounts are debited in their gaining ratio
• D. First all partners capital account are credited in their old ratio & then gaining partners capital accounts are debited in their new ratio

Answer 1

The correct option is D

First all partners capital account are credited in their old ratio & then gaining partners capital accounts are debited in their new ratio

Before retirement:
B's share of goodwill = 1/3 * 3,00,000 = 1,00,000
C's share of goodwill = 1/3 * 3,00,000 = 1,00,000
After retirement :
B's share of goodwill = 1/2 * 3,00,000 = 1,50,000
C's share of goodwill = 1/2 * 3,00,000 = 1,50,000

So gain for B & C = 1,50,000- 1,00,000 = 50,000 each
Therefore, B and C capital accounts will be debited with Rs. 50,000 each