A,B,C and D are partners sharing profits in the ratio 3:3:2:2 respectively.D retires and A,B C decide to share the future profit in the ratio 3:2:1.g/w of the firm 6,00,000.g/w already appears in the books at 4,50,000.The profits for the first year after D's retirement amount to 12,00,000.Give the necessary journal entries to record g/w and to distribute the profits.Show yr calculation clearly...
| Journal Entry | ||||||
| Date | Particulars | L.F. | Debit Amount Rs |
Credit Amount Rs |
||
| A’s Capital A/c | Dr. | 1,35,000 | ||||
| B’s Capital A/c | Dr. | 1,35,000 | ||||
| C’s Capital A/c | Dr. | 90,000 | ||||
| D’s Capital A/c | Dr. | 90,000 | ||||
| To Goodwill A/c | 4,50,000 | |||||
| (Existing goodwill written off among all the partners in their old-profit ratio i.e. 3:3:2:2) | ||||||
| A’s Capital A/c (6,00,000*12/60) | Dr. | 1,20,000 | ||||
| B’s Capital A/c (6,00,000*2/60) | Dr. | 20,000 | ||||
| To C’s Capital A/c (6,00,000*2/60) | 20,000 | |||||
| To D’s Capital A/c (6,00,000*2/10) | 1,20,000 | |||||
| (A and B are gaining partners compensate D for his share of goodwill and C is sacrificing partner) | ||||||
| Profit and Loss A/c | Dr. | 12,00,000 | ||||
| To A’s Capital A/c | 6,00,000 | |||||
| To B’s Capital A/c | 4,00,000 | |||||
| To C’s Capital A/c | 2,00,000 | |||||
| (Profit distributed among the partners in their new-profit sharing ratio i.e. 3:2:1) | ||||||
Working Notes:
Old Ratio = 3:3:2:2
New Ratio = 3:2:1
Gaining Ratio = New Ratio - Old Ratio
A's Gaining Ratio = 3/6-3/10 = 12/60
B's Gaining Ratio = 2/6-3/10 = 2/60
C's Gaining Ratio = 1/6-2/10 = (2/60) (Sacrifice)