Question

Ravi, Guru, Mani, and Sonu were partners in a firm sharing profits in the ratio of 2 : 2 : 2 : 1. On 31^st January, 2023, Sonu retired.
On Sonu’s retirement, the Goodwill of the firm was valued at Rs.1,40,000.
The new profit-sharing ratio among Ravi, Guru, and Mani was 5 : 5 : 1.
Showing your workings clearly, pass the necessary Journal entry for the treatment of Goodwill in the books of the firm on Sonu’s retirement without opening the goodwill account.

Hint:

When adjusting goodwill, calculate the proportionate share for each partner based on the profit-sharing ratio before and after the change.

Answer 1

Goodwill is allocated to partners based on their sacrificing or gaining ratios. Upon Sonu's retirement: \[ \text{Goodwill = Rs.1,40,000} \] Journal Entry: \[ \text{Journal Entry:} \] \[ \begin{array}{|l|c|c|} \hline \textbf{Particulars} & \textbf{Dr. Amount (Rs.)} & \textbf{Cr. Amount (Rs.)} \\ \hline \text{Ravi’s Capital A/c Dr.} & 10,000 & \\ \text{Guru’s Capital A/c Dr.} & 10,000 & \\ \text{To Sonu’s Capital A/c} & & 20,000 \\ \hline \end{array} \]