Question 22 Chapter 6 of +2-A
22. A, B, and C were partners in a firm sharing profits in the ratio of 6: 5: 4. Their capitals were A − 1,00,000; B − 80,000 and C − 60,000 respectively. On 1st April 2009, A retired from the firm and the new profit sharing ratio between B and C was decided as 1: 4. On A’s retirement, the goodwill of the firm was valued at 1,80,000. Showing your calculations clearly, pass the necessary Journal entry for the treatment of goodwill on A’s retirement.
The solution of Question 22 Chapter 6 of +2-A: –
| Date | Particulars |
L.F. | Debit | Credit | |
| C’s Capital A/c | Dr | 96,000 | |||
| To A’s Capital A/c | 72,000 | ||||
| To B’s Capital A/c | 24,000 | ||||
| (Being Adjustment of A′s and B′s share of goodwill) | |||||
Working Note: –
i. Calculation of B’s share of goodwill
A :B :C = 6:5:4(Old ratio)
B :C=1:4 (New ratio)
ii Gaining Ratio
| B’s Gain | = | 1 | – | 5 |
| 5 | 15 | |||
| = | 3 | – | 5 | |
| 15 | ||||
| = | 2 | |||
| 15 | ||||
| C’s Gain | = | 4 | – | 4 |
| 5 | 15 | |||
| = | 12 | – | 4 | |
| 15 | ||||
| = | 8 | |||
| 15 | ||||
A:C = 2: 8
Calculation of Retiring Partner’s Share of Goodwill
| A’s share of goodwill | = | 1,80,000 | X | 6 |
| 15 | ||||
| = | Rs 72,000 |
| B’s share of goodwill | = | 1,80,000 | X | 2 |
| 15 | ||||
| = | Rs 24,000 |
A’s and B’s share of goodwill be brought by C only
Therefore, C’s Capital A/c will be debited with 72,000+24,000 = Rs 96,000
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
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
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