(When one of the Remaining Partners also sacrifices in addition to the Retiring Partner). X,Y and Z were partners sharing profits in the ratio of 3:2:1. Z retired and the new profit-sharing ratio between X and Y was 1:2. On Z's retirement, goodwill of the firm was valued at RS.30,000. Pass necessary Journal entries for the treatment of goodwill on Z's retirement without opening the Goodwill Account.

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Solution

Goodwill $= R s .30, 000$

Partners (3 : 2 :1)
old ratio (1 : 2)
New ratio Net effect
X
Y
Z 15,000
10,000
5,000 10,000
20,000
- 5,000 (Cr)
10,000 (Dr)
5,000 (Cr)
30,000 30,000
$∴$ Journal entry
Y's capital a/c Dr $10, 000$
To X's capital a/c $5000$
To Z's capital a/c $5000$

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Partners	(3 : 2 :1) old ratio	(1 : 2) New ratio	Net effect
X Y Z	15,000 10,000 5,000	10,000 20,000 -	5,000 (Cr) 10,000 (Dr) 5,000 (Cr)
	30,000	30,000

Goodwill =Rs.30,000 Partners(3 : 2 :1)old ratio (1 : 2)New ratio Net effect XYZ 15,00010,0005,000 10,00020,000- 5,000 (Cr)10,000 (Dr)5,000 (Cr) 30,00030,000 ∴ Journal entryY's capital a/c Dr 10,000 To X's capital a/c 5000 To Z's capital a/c 5000

Goodwill $= R s .30, 000$

Partners (3 : 2 :1)
old ratio (1 : 2)
New ratio Net effect
X
Y
Z 15,000
10,000
5,000 10,000
20,000
- 5,000 (Cr)
10,000 (Dr)
5,000 (Cr)
30,000 30,000
$∴$ Journal entry
Y's capital a/c Dr $10, 000$
To X's capital a/c $5000$
To Z's capital a/c $5000$