. Tvisha and Divya were partners in a firm carrying on a tiffin service in Hyderabad.
Divya noticed that a lot of food is left at the end of the day. To avoid wastage, she
suggested that the same may be distributed among the needy. Tvisha wanted it to be
mixed with the food to be served the next day.
Tvisha then gave a proposal that if her share in the profit is increased, she will not mind
free distribution of left over food. Divya happily agreed. So, they decided to change
their profit sharing ratio to 3 : 2 with immediate effect. On the date of change in the
profit-sharing ratio, the goodwill of the firm was valued at ` 50,000.
(a) Pass the necessary adjustment entry for the treatment of goodwill
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Answer:
Gaining partner Dr. xxx
To Sacrificing Partner xxx
Tvisha's current/capital account. Dr. 5000
To Divya's current/capital account 5000
Explanation:
old ratio = 1:1
new ratio = 3:2
tvisha's gain in ratio = new - old
= 3/5 - 1/2
= (6 - 5)/10
= 1/10
Divya's sacrifice in ratio = new - old
= 2/5 - 1/2
= (4 - 5)/10
= -1/10
Total goodwill = `50,000
goodwill to be adjusted = `50,000 × 1/10 = `5000
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