Question

X, Y and Z are partners sharing profits in the ratio of 3 : 2 : 1. Goodwill is appearing in the books at a value of ₹ 60,000. Y retires and at the time of Y's retirement, goodwill is valued at ₹ 84,000. X and Z decided to share future profits in the ratio of 2 : 1. Pass the necessary Journal entries through Goodwill Account.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	X’s Capital A/c	Dr.		30,000
	Y’s Capital A/c	Dr.		20,000
	Z’s Capital A/c	Dr.		10,000
	To Goodwill A/c				60,000
	(Goodwill written off)
		Dr.		14,000
	X’s Capital A/c	Dr.		14,000
	Z’s Capital A/c				28,000
	To Y’s Capital A/c
	(Adjustment of Y’s share of goodwill)

Working Notes:

WN1:Calculation of Gaining Ratio

$\begin{array}{l}\text{X :Y :Z}=3\text{:2:1}\left(\text{Old ratio}\right)\\ \text{X :Z = 2:1(New ratio)}\\ \text{Gaining Ratio = New Ratio - Old Ratio}\\ \text{X's Gain=}\frac{2}{3}-\frac{3}{6}=\frac{1}{6}\\ \text{Z's Gain=}\frac{1}{3}-\frac{1}{6}=\frac{1}{6}\\ \text{X:Z}=1:1\end{array}$

WN2: Calculation of Retiring Partner’s Share of Goodwill

$\begin{array}{l}\text{Y's share of goodwill=84,000}\times \frac{2}{6}=\text{Rs 28,000}\\ \text{Y's share of goodwill will be brought by X and Z in their gaining ratio1:1}\\ \text{Therefore, X's Capital A/c will be debited with 28,000}\times \frac{1}{2}=\text{Rs 14,000}\\ \text{And, Y's Capital A/c will be debited with 28,000}\times \frac{1}{2}=\text{Rs 14,000}\end{array}$