A and B have been carrying on business in partnership with fixed capitals of ₹ 2,40,000 and ₹ 1,20,000 respectively and sharing profits in the same proportion

A and B have been carrying on business in partnership with fixed capitals of ₹ 2,40,000 and ₹ 1,20,000 respectively and sharing profits in the same proportion. They decided that with effect from April 1, 2024 they would share profits and losses in the ratio of 3 : 2. For this purpose goodwill is to be valued at three year’s purchase of the average of preceding three year’s profits. The profits for the years ending 31st March were 2021 : ₹ 75,000; 2022 : ₹ 60,000, 2023 ₹ 80,000 and 2024 ₹ 1,30,000. Give the necessary journal entry.

[Ans. Value of Goodwill ₹ 2,70,000, Debit B’s Current A/c by ₹ 18,000 and Credit A’s Current A/c by ₹ 18,000.]