Question

X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2 , decided to share future profits and losses equally with effect from 1st April, 2018. On that date , the goodwill appeared in the books at ₹ 12,000. But it was revalued at ₹ 30,000. Pass journal entries assuming that goodwill will not appear in the books of account .

Answer 1

Journal
Date 2018	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
(i)	X’s Capital A/c	Dr.		6,000
April 1	Y’s Capital A/c	Dr.		3,600
	Z’s Capital A/c	Dr.		2,400
	To Goodwill A/c				12,000
	(Goodwill written off)
(ii)	Y’s Capital A/c	Dr.		1,000
April 1	Z’s Capital A/c	Dr.		4,000
	To X’s Capital A/c				5,000
	(Amount of goodwill adjusted on change in profit sharing ratio)

Working Notes:

WN 1 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X, Y and Z) = 5 : 3 : 2

New Ratio (X, Y and Z) = 1 : 1 : 1

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

WN 2 Writing off of Old Goodwill

WN 3 Adjustment of Goodwill