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Question

P, Q, R and S were partners in a firm sharing profits in the ratio of 5 : 3 : 1 : 1. On 1st January, 2017, S retired from the firm. On S's retirement the goodwill of the firm was valued at ₹ 4,20,000. The new profit-sharing ratio between P, Q and R will be 4 : 3 : 3.
Showing your  working notes clearly, pass necessary journal entry for the treatment of goodwill in the books of the firm on S's retirement.


Solution

Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

  R’s  Capital A/c

Dr.

 

84,000

 
    To P’s  Capital A/c      

42,000

    To S’s  Capital A/c      

42,000

  (Goodwill adjusted)        
           

Working Notes:

Gaining Ratio = New Ratio – Old Ratio 

P=410510=110sacrificeQ=310310=0R=310110=210

P's share=4,20,000×110=42,000R's share=4,20,000×210=84,000S's share=4,20,000×110=42,000


Accountancy
TS Grewal Vol. I (2018)
Standard XII

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