# Question 20 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 20 Chapter 6 of +2-A

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

#### 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. 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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