Question 20 Chapter 6 of +2-A
Table of Contents
20. M, N and O are partners in firm sharing profits in the ratio of 3: 2: 1. Goodwill has been valued at 60,000. On N’s retirement, M and O agree to share profits equally. Pass the necessary journal entry for treatment of N’s share of goodwill.
The solution of Question 20 Chapter 6 of +2-A: –
| Date | Particulars |
L.F. | Debit | Credit | |
| O’s Capital A/c | Dr | 20,000 | |||
| To N’s Capital A/c | 20,000 | ||||
| (Being Adjustment of B′s share of goodwill) | |||||
Working Note: –
i. Calculation of B’s share of goodwill
M :N :O = 3:2:1(Old ratio)
M :O =1:1(New ratio)
ii Gaining Ratio
| M’s Gain | = | 1 | – | 3 |
| 2 | 6 | |||
| = | 3 | – | 3 | |
| 6 | ||||
| = | 0 | |||
| 6 | ||||
| O’s Gain | = | 1 | – | 1 |
| 2 | 6 | |||
| = | 3 | – | 1 | |
| 6 | ||||
| = | 2 | |||
| 6 | ||||
M:O = 0: 2
Calculation of Retiring Partner’s Share of Goodwill
| N’s share of goodwill | = | 60,000 | X | 2 |
| 6 | ||||
| = | Rs 20,000 |
N’s share of goodwill will be brought by O only
Therefore, O’s Capital A/c will be debited with Rs 20,000
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. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
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
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