Question

Varun, Tarun, Arun, and Barun were partners in a firm sharing profits in the ratio of 5:3:2:2. Arun retired on 31\textsuperscript{st March, 2023. Varun, Tarun, and Barun decided to share future profits equally. On Arun’s retirement, Goodwill of the firm was valued at \rupee9,00,000. Showing your workings clearly, pass the necessary Journal Entry for treatment of Goodwill on Arun’s retirement without opening goodwill account.}

Hint:

When a partner retires, goodwill is adjusted among the remaining partners in their gaining ratio without opening a goodwill account.

Answer 1

1. Calculation of Gaining Ratio: \[ \text{Old Ratio} = 5:3:2:2, \quad \text{New Ratio} = 1:1:1. \] \[ \text{Gaining Ratio} = \text{New Ratio} - \text{Old Ratio} = (1-5/12):(1-3/12):(1-2/12) = 7:5:3. \] 2. Arun's Share of Goodwill: \[ \text{Goodwill to be credited to Arun} = \text{Total Goodwill} \times \text{Arun's Share} = \rupee9,00,000 \times \frac{2}{12} = \rupee1,50,000. \] % Journal Entries \begin{center} \begin{tabular}{|p{3cm}|p{8cm}|p{2.5cm}|p{2.5cm}|} Date & Particulars & Debit (\rupee) & Credit (\rupee)
31-Mar-2023 & Varun’s Capital A/c & 87,500 &
& Tarun’s Capital A/c & 62,500 &
& Barun’s Capital A/c & 37,500 &
& {0.5cm} To Arun’s Capital A/c & & 1,50,000
& (Adjustment of goodwill among partners in gaining ratio) & &
\end{tabular} \end{center}