Question

A, B and C were partners sharing profits and losses in the ratio of 7 : 3 : 2. From 1st January, 2019 they decided to share profits and losses in the ratio of 8:4:3. Goodwill is ₹1,20,000. In Adjustment entry for goodwill:


(A) Cr. A by ₹6,000; Dr. B by ₹2,000; Dr. C by ₹4,000
(B) Dr. A by ₹6,000; Cr. B by ₹2,000; Cr. C by ₹4000
(C) Cr. A by ₹6,000; Dr. B by ₹4,000; Dr. C by ₹2,000
(D) Dr. A by ₹6,000; Cr. B by ₹4,000; Cr. C by ₹2,000​

Answer 1

Given data:

• A, B and C were partners in a firm sharing profits and losses in the ratio 7:3:2.
• They decided to share their profits and losses in the ratio 8:4:3.
• Goodwill is valued at Rs 1,20,000.

To find: The adjustment entry for goodwill.

Answer:

Old ratios:

• For A = 7/12
• For B = 3/12
• For C = 2/12

New ratios:

• For A = 8/15
• For B = 4/15
• For C = 3/15

Sacrificing ratio/Gaining ratio = Old ratio - New ratio

• A positive difference ⇒ Sacrifice
• A negative difference ⇒ Gain

For A:

• Sacrificing/Gaining ratio = 7/12 - 8/15 = (105 - 96)/180 = 9/180 [sacrificing]

For B:

• Sacrificing/Gaining ratio = 3/12 - 4/15 = (45 - 48)/180 = -3/180 [gaining]

For C:

• Sacrificing/Gaining ratio = 2/12 - 3/15 = (30 - 36)/180 = -6/180 [gaining]

Calculation of goodwill distribution:

Goodwill share = Goodwill × Sacrificing/Gaining ratio

For A:

• Goodwill share = Rs 1,20,000 × 9/180 = Rs 6,000

For B:

• Goodwill share = Rs 1,20,000 × 3/180 = Rs 2,000

For C:

• Goodwill share = Rs 1,20,000 × 6/180 = Rs 4,000

Adjustment entry:

Gaining partner(s)' capital A/c ... Dr

• To sacrificing partner(s)' capital A/c

B's capital A/c ... Dr - Rs 2,000

C's capital A/c ... Dr - Rs 4,000

• To A'c capital A/c - Rs 6,000

Answer 2

Answer:

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