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,
 
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)        
           
Working Notes:
Calculation of Gaining/Sacrificing Ratio
Sacrificing Ratio = Old Ratio ─ New Ratio
Jai=35-12=110(sacrifice)Raj=25-12=-110(gain)
Goodwill to be adjusted = 1,00,000 ─ 25,000 = 75,000
Jai's share=75,000×110=7,500 (credit, since sacrificing)Raj's share=75,000×110=7,500 (debit, since gaining)

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