Question 28 Chapter 6 of +2-A
28. Ram, Laxman and Bharat are partners sharing profits in the ratio of 3 : 2 : 1. Goodwill is appearing in the books at a value of 1,80,000. Laxman retires and at the time of his retirement, goodwill is valued at 2,52,000. Ram and Bharat decided to share future profits in the ratio of 2 : 1. The Profit for the first year after Laxman’s retirement amount to 1,20,000. Give the necessary Journal entries to record goodwill and to distribute the profit. Show your calculations clearly.
The solution of Question 28 Chapter 6 of +2-A: –
Journal Entries
| Date | Particulars |
L.F. | Debit | Credit | |
| Ram’s Capital A/c | Dr. | 90,000 | |||
| Laxman’s Capital A/c | Dr. | 60,000 | |||
| Bharat’s Capital A/c | Dr. | 30,000 | |||
| To Goodwill A/c | 1,80,000 | ||||
| (Being Goodwill written off) | |||||
| Ram’s Capital A/c | Dr. | 42,000 | |||
| Bharat’s Capital A/c | Dr. | 42,000 | |||
| To Laxman’s Capital A/c | 84,000 | ||||
| (Being Adjustment of Laxman ′s share of goodwill) | |||||
| Profit & Loss Appropriation A/c | Dr. | 1,20,000 | |||
| To Ram’s Capital A/c | 80,000 | ||||
| To Laxman’s Capital A/c | 40,000 | ||||
| (Being Profit on revaluation transferred to Partners ′ Capital A/c) | |||||
Working Note: –
Calculation of Ratios
Ram :Laxman :Bharat = 3:2:1(Old ratio)
Ram :Bharat = 2:1(New ratio)
Gaining Ratio = New Ratio − Old Ratio
| Ram’s Gain | = | 2 | – | 3 |
| 3 | 6 | |||
| = | 4 | – | 3 | |
| 6 | ||||
| = | 1 | |||
| 6 | ||||
| Bharat’s Gain | = | 1 | – | 1 |
| 3 | 6 | |||
| = | 2 | – | 1 | |
| 6 | ||||
| = | 1 | |||
| 6 | ||||
Calculation of Retiring Partner’s Share of Goodwill
| Laxman’s share of goodwill | = | 2,52,000 | X | 2 |
| 6 | ||||
| = | Rs 84,000 |
Laxman’s share of goodwill will be brought by Ram and Bharat in their gaining ratio1:1
| Therefore, Ram’s and Bharat Capital A/c will be debited with | = | 84,000 | X | 1 |
| 2 | ||||
| = | Rs 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. 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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