Question

Kavi, Ravi, Kumar and Guru were partners in a firm sharing profits in the ratio of $3:2:2:1$. On. 1/2/2017, Guru retired and the new profit sharing ratio decided between Kavi, Ravi and Kumar was $3:1:1$. On Guru's retirement the goodwill of the firm was valued at $Rs.3,60,000$. Showing your working notes clearly, pass necessary journal entry in the books of the firm for the treatment of goodwill on Guru's retirement.

Answer 1

Journal

Date	Particular	L.F.	Debit Amount (Rs.)	Credit Amount (Rs.)
	Kavi's Capital A/c Dr. To Ravi's Capital A/c To Kumar's Capital A/c To Guru's Capital A/c (Goodwill adjusted through capitals)		$81,000$	$18,000$ $18,000$ $45,000$

Working Notes:

Gaining Ratio = New Ratio - Old Ratio

Kavi $=\frac{3}{5}-\frac{3}{8}=\frac{9}{40}$

Ravi $=\frac{1}{5}-\frac{2}{8}=-\frac{2}{40}$ (sacrifice)

Kumar $=\frac{1}{5}-\frac{2}{8}=-\frac{2}{40}$ (sacrifice)

Kavi's share of goodwill $=3,60,000\times \frac{9}{40}=Rs.81,000$

Ravi's share of goodwill $=3,60,000\times \frac{2}{40}=Rs.18,000$

Kumar's share of goodwill $=3,60,000\times \frac{2}{40}=Rs.18,000$

Guru's share of goodwill $=3,60,000\times \frac{1}{8}=Rs.45,000$