Alia, Karan and Shilpa were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Goodwill appeared in their books at a value of ₹ 60,000 and General Reserve at ₹ 20,000

Alia, Karan and Shilpa were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Goodwill appeared in their books at a value of ₹ 60,000 and General Reserve at ₹ 20,000. Karan decided to retire from the firm. On the date of his retirement, goodwill of the firm was valued at ₹ 2,40,000. The new profit sharing ratio decided among Alia and Shilpa was 2 : 3.

Record necessary Journal entries on Karan’s retirement.

[Ans. Adjustment of Goodwill : Debit Shilpa’s Capital A/c by ₹ 96,000; Credit Alia’s Capital A/c by ₹ 24,000 and Karan’s Capital A/c by ₹ 72,000.]