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Accounting for Goodwill

Profit and lo...

Question

Profit and losses ratio is for 3:2:1, for A, B and C respectively. From 1st April 2018, they decide to share profit and losses equally. Value of Goodwill of the firm is Rs 24,000. Who amongst the following has made a sacrifice?

A

None of the above

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B

Both A & B

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C

A only

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D

B only

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Solution

The correct option is C
A only

Old ratio: 3:2:1

New ratio: 1:1:1

Sacrificing or gaining ratio= Old ratio – New ratio

A’s share= 3/6 – 1/3 = -1/6 (sacrifice)

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