Question

Asha, Naveen and Shalini were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Goodwill appeared in their books at a value of ₹ 80,000 and General Reserve at ₹ 40,000. Naveen decided to retire from the firm. On the date of his retirement, goodwill of the firm was valued at ₹ 1,20,000. The new profit ratio decided among Asha and Shalini is 2 : 3.
Record necessary journal entries on Naveen’s retirement.

Answer 1

Working Notes:

Calculation of Gaining Ratio

Gaining Ratio = New share - Old Share

$\begin{aligned}&\text { Asha's }=\frac{2}{5}-\frac{5}{10}=\frac{4}{10}-\frac{5}{10}=\frac{-1}{10} \text { (sacrifice) }\\&\text { Shalini's }=\frac{3}{5}-\frac{2}{10}=\frac{6}{10}-\frac{2}{10}=\frac{4}{10}\end{aligned}$

Thus, Both Asha and Naveen would be compensated by Shalini in the ratio of 1 : 3

$\begin{aligned}&\text { Asha's sacrifice for } \frac{1}{10} \mathrm{th}=1,20,000 \times \frac{1}{10}=12,000\\&\text { Naveen's sacrifice for } \frac{3}{10} \mathrm{th}=1,20,000 \times \frac{3}{10}=36,000\end{aligned}$