Question

X, Y and Z are partners sharing profits in the ratio of 2 : 3 : 5. Goodwill is appearing in their books at a value of Rs 60,000. X retires and on the day of X's retirement Goodwill is valued at Rs 45,000. Y and Z decided to share future profits equally. Pass the necessary Journal entries.

Answer 1

JOURNAL

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Dr.(Rs)}& \text{Cr. (Rs)}\\ & \text{X's Capital A/c}& \text{Dr.}& & 12,000& \\ & \text{Y's Capital A/c}& \text{Dr.}& & 18,000& \\ & \text{Z's Capital A/c}& \text{Dr.}& & 30,000& \\ & \text{To Goodwill A/c}& & & & 60,000\\ & \text{(Goodwill appearing in the books written off in old ratio)}& & & & \\ & \text{Y's Capital A/c}& \text{Dr.}& & 9,000& \\ & \text{To X's Capital A/c}(\frac{2}{10}ofRs45,000)& & & & 9,000\\ & \text{(X's share of goodwill debited to Y's capital account, as}& & & & \\ & \text{he alone has gained on X's retirement)}& & & & \end{array}$

Gaining Ratio = New Ratio - Old Ratio

Y Gains = $\frac{1}{2}-\frac{3}{10}=\frac{5-3}{10}=\frac{2}{10}$

Z Gains = $\frac{1}{2}-\frac{5}{10}=\frac{5-5}{10}=0$