A, B and C were partners sharing profits and losses in the ratio of 7 : 3 : 2. From 1st April 2021, they decided to share profits and losses in the ratio of 8 : 4 : 3. Goodwill is to be valued at the average of three year’s profits preceding the date of change in profit sharing ratio

A, B and C were partners sharing profits and losses in the ratio of 7 : 3 : 2. From 1st April 2021, they decided to share profits and losses in the ratio of 8 : 4 : 3. Goodwill is to be valued at the average of three year’s profits preceding the date of change in profit sharing ratio. The profits for the year ending 31st March 2018, 2019, 2020 and 2021 were ₹ 52,000, ₹ 48,000, ₹ 60,000 and ₹ 90,000 respectively. Give the necessary journal entry.

[Ans. Value of Goodwill ₹ 66,000; Debit B by ₹ 1,100 and C by ₹ 2,200 Credit A by ₹ 3,300.]