T.S. Grewal Class 12 Chapter 6 Q.8 - Death of a Partner

Question 8

P, Q and R were partners sharing profits in the ratio of 3 : 2 : 1. P dies, and the new profit-sharing ratio of Q and R is agreed to be equal. On P’s death, goodwill of the firm was valued at ₹60,000. Pass the necessary entries for the treatment of goodwill under the following conditions: (a) Goodwill does not exist in the books; (b) Goodwill exists in the books at ₹30,000.

Solution

(a) When goodwill does not exist in the books

JOURNAL

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Q’s Capital A/c    Dr.		10,000
	R’s Capital A/c    Dr.		20,000
	To P’s Capital A/c			30,000
	(P’s share of goodwill adjusted through Q’s and R’s Capital Accounts in gaining ratio 1 : 2)

(b) When goodwill exists in the books at ₹30,000

JOURNAL

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	P’s Capital A/c    Dr.		15,000
	Q’s Capital A/c    Dr.		10,000
	R’s Capital A/c    Dr.		5,000
	To Goodwill A/c			30,000
	(Existing goodwill written off among all partners in old ratio 3 : 2 : 1)
	Q’s Capital A/c    Dr.		10,000
	R’s Capital A/c    Dr.		20,000
	To P’s Capital A/c			30,000
	(P’s share of goodwill adjusted through Q’s and R’s Capital Accounts in gaining ratio 1 : 2)

Working Note: P’s share of goodwill = 60,000 × 3/6 = ₹30,000. Gaining ratio: Q’s gain = 1/2 – 2/6 = 1/6; R’s gain = 1/2 – 1/6 = 2/6 → Gaining Ratio = 1 : 2. Q pays 30,000 × 1/3 = ₹10,000; R pays 30,000 × 2/3 = ₹20,000.