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Question
A, B and C are partners sharing profits in the ratio of 3 : 2 : 1. B retired and the new profit-sharing ratio between A and C was 2 : 1. On B's retirement, the goodwill of the firm was valued at ₹ 90,000. Pass necessary Journal entry for the treatment of goodwill on B's retirement.
Solution
Journal
|
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
A’s Capital A/c |
Dr. |
|
15,000 |
|
|
C’s Capital A/c |
Dr. |
|
15,000 |
|
|
To B’s Capital A/s |
|
|
30,000 |
|
|
(Adjustment B’s share of goodwill made) |
|
|
|
|
Working Notes:
WN 1 Calculation of Gaining Ratio
Old Ratio (A, B and C) = 3 : 2 : 1
B retires from the firm.
New Ratio (A and C) = 2 : 1
Gaining Ratio = New Ratio − Old Ratio
A's share = `2/3 - 3/6 = (4-3)/6 = 1/6`
C's share = `1/3 - 1/6 = (2-1)/6 = 1/6`
∴Gaining Ratio = 1 : 1
WN 2 Adjustment of Goodwill
Goodwill of the firm = Rs 90,000
B’s share of goodwill = `90,000 xx 2/6 = "Rs" 30,000`
This share of goodwill is to be debited to remaining Partners’ Capital Accounts in their gaining ratio (i.e. 1 : 1)
A is to be debited with = `30,000 xx 1/2 = "Rs" 15,000`
C is to be debited with = `30,000 xx 1/2 = "Rs" 15,000`
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|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
| General Reserve |
12,000 |
Bank | 7,600 | ||
| Sundry Creditors |
15,000 |
Debtors |
6,000 |
|
|
| Bills Payable |
12,000 |
Less: Provision for Doubtful Debts |
400 |
5,600 |
|
| Outstanding Salary | 2,200 | Stock | 9,000 | ||
| Provision for Legal Damages | 6,000 | Furniture | 41,000 | ||
| Capital A/cs: | Premises | 80,000 | |||
| Pankaj |
46,000 |
|
|||
| Naresh | 30,000 | ||||
| Saurabh |
20,000 |
96,000 |
|||
|
1,43,200 |
1,43,200 |
||||
Additional Information:
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|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
| Bills Payable |
12,000 |
Freehold Premises | 40,000 | ||
| Sundry Creditors | 28,000 | Machinery | 30,000 | ||
| General Reserve | 12,000 | Furniture | 12,000 | ||
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| X | 30,000 | Sundry Debtors |
20,000 |
|
|
| Y | 20,000 | Less: Provision for Doubtful Debts |
1,000 |
19,000 |
|
| Z | 28,000 |
78,000 |
Cash |
7,000 |
|
|
1,30,000 |
1,30,000 |
||||
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| Employees' Provident Fund | 5,250 | Debtors | 97,500 | |
| Workmen Compensation Reserve | 22,500 | Stock | 82,500 | |
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| 3,82,500 | 3,82,500 | |||
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|
Liabilities |
Amount (₹) |
Assets |
Amount |
||
|
Creditors |
43,000 |
Cash |
10,200 |
||
|
Bills Payable |
17,000 |
Stock |
24,500 |
||
|
General Reserve |
70,000 |
Debtors | 27,300 | ||
|
Capital A/cs: |
Land and Building | 1,40,000 | |||
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| C |
50,000 |
||||
| D |
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1,42,000 |
|||
|
2,72,000 |
2,72,000 |
||||
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| Liabilities | Amount (₹) |
Assets | Amount (₹) |
||
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|
Z |
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Assets | Amount (₹) |
|
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Assets | Amount (₹) |
|
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| Liabilities | Amount (₹) |
Assets | Amount (₹) |
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| Y's Capital | 54,000 | Machinery | 38,000 |
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| Employees' Provident Fund | 1,000 | Stock | 7,000 |
| Workmen Compensation Reserve | 10,000 | Bank | 25,000 |
| Advertisement Suspense A/c | 800 | ||
| 1,26,800 | 1,26,800 |
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BALANCE SHEET OF RAM, MOHAN, SOHAN AND HARI
as on 1st April, 2016
| Liabilities | ₹ | Assets | ₹ | |
| Capital A/cs: | Fixed Assets | 9,00,000 | ||
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| Mohan | 4,50,000 | |||
| Sohan | 2,50,000 | |||
| Hari | 2,00,000 | 13,00,000 | ||
| Workmen Compensation Reserve | 1,20,000 | |||
| 14,20,000 | 14,20,000 | |||
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At the time of admission of a new partner, Which adjustments are required:
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A & B are partners sharing profits and losses in the ratio of 3 : 2. C is admitted for ¼ and for which ₹ 30,000 and ₹ 10,000 are credited as a premium for goodwill to A and B respectively. The new profit sharing ratio of A : B : C will be ______.
