# Question 14 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Q-14 - CH-6 - T.S. Grewal +2 Book 2019 - Solution-min

Question 14 Chapter 6 of +2-A

14. P, Q, R, and S were partners in firm sharing profits in the ratio of 5 : 3 : 1: 1. On 1st January 2019, S retired from the firm. On S’s retirement, the goodwill of the firm was valued at 4,20,000.
The new profit-sharing ratio among P, Q, and R will be 4 : 3 : 3.
Showing your working notes clearly, pass necessary journal entry for the treatment of goodwill in the books of the firm on S’s retirement.

## The solution of Question 14 Chapter 6 of +2-A: –

 Date Particulars L.F. Debit Credit R’s Capital A/c Dr 84,000 To P’s Capital A/c 42,000 To S’s Capital A/c 42,000 (Being share of R’s goodwill adjusted)

### Working Note: –

Old Ratio of P, Q, R, and S = 5: 3: 1: 1
S retires from the firm

New Ratio of P, Q, and R = 4: 3: 3

#### Calculation of Gaining Ratio: –

Gaining Ratio = New Ratio – Old Ratio

 P’s Sacrificing Share = 4 – 5 10 10 = 4 – 5 10 = 1 10
 Q’s Gaining Share = 3 – 3 10 10 = 3 – 3 10 = Nil

 R’s Gaining Share = 3 – 1 10 10 = 3 – 1 10 = 2 10

Firm’s Share of Goodwill =  4,20,000

P’s Share of Goodwill =  Firm’s Goodwill X P’s Sacrificing Shares

 P’s Share of Goodwill = 4,20,000 X 1 10 = 42,000

R’s Share of Goodwill =  Firm’s Goodwill X R’s Gaining Shares

 R’s Share of Goodwill = 4,20,000 X 2 10 = 84,000

S’s Share of Goodwill =  Firm’s Goodwill X S’s Sacrificing Shares

 S’s Share of Goodwill = 4,20,000 X 1 10 = 42,000

#### T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

• Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
• Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
• Chapter No. 3 – Goodwill: Nature and Valuation
• Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
• Chapter No. 5 – Admission of a Partner
• Chapter No. 6 – Retirement/Death of a Partner
• Chapter No. 7 – Dissolution of a Partnership Firm

### T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 1 – Financial Statements of a Company
• Chapter No. 2 – Financial Statement Analysis
• Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
• Chapter No. 4 – Accounting Ratios
• Chapter No. 5 – Cash Flow Statement