Loading Tutorstips...
✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. From 1st April, 2025, they decided to share profits and losses equally. The Partnership Deed provides that in the event of any change in the profit-sharing ratio, the goodwill should be valued at two years’ purchase of the average profit of the preceding five years. The profits and losses of the preceding years ended 31st March were: 2021 ₹70,000; 2022 ₹75,000; 2023 ₹55,000; 2024 ₹35,000; 2025 (₹10,000) Loss. Calculate goodwill and pass the Journal entry.
Average Profit = (₹70,000 + ₹75,000 + ₹55,000 + ₹35,000 – ₹10,000) / 5 = ₹2,25,000 / 5 = ₹45,000.
Goodwill = ₹45,000 × 2 = ₹90,000.
Sacrifice / (Gain): X = 5/10 – 1/3 = 5/30 (Sacrifice); Y = 3/10 – 1/3 = –1/30 (Gain); Z = 2/10 – 1/3 = –4/30 (Gain).
JOURNAL
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| 2025 Apr 1 | Y’s Capital A/c Dr. (90,000 × 1/30) | 3,000 | ||
| Z’s Capital A/c Dr. (90,000 × 4/30) | 12,000 | |||
| To X’s Capital A/c (90,000 × 5/30) | 15,000 | |||
| (Adjustment of goodwill on change in profit-sharing ratio) |
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "T.S. Grewal Class 12 Chapter 3 Q.8 - Change in Profit-Sharing Ratio Among the Existing Partners", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 3 - Change in Profit-Sharing Ratio Among the Existing Partners.
It is primarily curated for Class 11 and Class 12 high school commerce, accounting, and economics students, as well as aspirants preparing for board exams or CA Foundation.
You can take our custom-built interactive practice quiz directly on this page to test your understanding of "T.S. Grewal Class 12 Chapter 3 Q.8 - Change in Profit-Sharing Ratio Among the Existing Partners" instantly.