Loading Tutorstips...
✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
A, B, C and D are partners sharing profits in the ratio of 3 : 3 : 2 : 2. D retires and A, B and C decide to share future profits in the ratio of 3 : 2 : 1. Goodwill of the firm is valued at ₹6,00,000, and goodwill already exists in the books at ₹4,50,000. Profit for the first year after D’s retirement was ₹12,00,000. Give the necessary Journal entries to record goodwill and to distribute the profits.
Gain / (Sacrifice): A = 3/10 – 3/6 = –6/30 (Gain); B = 3/10 – 2/6 = –1/30 (Gain); C = 2/10 – 1/6 = 1/30 (Sacrifice); D (retires) = 2/10 = 6/30.
JOURNAL
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| 1. | A’s Capital A/c Dr. 1,35,000; B’s Capital A/c Dr. 1,35,000; C’s Capital A/c Dr. 90,000; D’s Capital A/c Dr. 90,000 | 4,50,000 | ||
| To Goodwill A/c | 4,50,000 | |||
| (Existing goodwill written off in the old ratio 3 : 3 : 2 : 2) | ||||
| 2. | A’s Capital A/c Dr. (6,00,000 × 6/30) | 1,20,000 | ||
| B’s Capital A/c Dr. (6,00,000 × 1/30) | 20,000 | |||
| To C’s Capital A/c (6,00,000 × 1/30) | 20,000 | |||
| To D’s Capital A/c (6,00,000 × 6/30) | 1,20,000 | |||
| (Gaining partners A and B compensating the sacrificing partner C and the retiring partner D) | ||||
| 3. | Profit & Loss Appropriation A/c Dr. | 12,00,000 | ||
| To A’s Capital A/c 6,00,000; To B’s Capital A/c 4,00,000; To C’s Capital A/c 2,00,000 | 12,00,000 | |||
| (Profit distributed in the new ratio 3 : 2 : 1) |
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 5 Q.18 - Retirement of a Partner", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 5 - Retirement of a Partner.
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 5 Q.18 - Retirement of a Partner" instantly.