Jai and Raj are partners sharing profits in the ratio 3:2. With effect from 1st April, 2018, they decided to share profits equally. Goodwill apeared in the books at Rs. 25,000. As on 1st April, 2018, it was valued at Rs. 1,00,000. They decided to carry goodwill in the books of the firm.
Pass the journal entry giving effect to the above.
Dear Student,
Working Notes:
Calculation of Gaining/Sacrificing Ratio
Sacrificing Ratio = Old Ratio ─ New Ratio
Goodwill to be adjusted = 1,00,000 ─ 25,000 = 75,000
Journal | |||||
Date | Particulars | L.F. | Debit Amount (Rs) | Credit Amount (Rs) | |
Raj’s Capital A/c | Dr. | 7,500 | |||
To Jai’s Capital A/c | 7,500 | ||||
(Adjustment for goodwill) | |||||
Calculation of Gaining/Sacrificing Ratio
Sacrificing Ratio = Old Ratio ─ New Ratio
Goodwill to be adjusted = 1,00,000 ─ 25,000 = 75,000