Avya, Divya and Kavya were equal partners. They decided to change the profit sharing ratio to 4 : 3 : 2. For this purpose, the goodwill of the firm was valued at ₹ 90,000.
Avya, Divya and Kavya were equal partners. They decided to change the profit sharing ratio to 4 : 3 : 2. For this purpose, the goodwill of the firm was valued at ₹ 90,000.
The Journal entry for the treatment of Goodwill on change in profit sharing ratio will be:
a)
Kavya’s Capital A/c Dr. ₹ 10,000
To Avya’s Capital A/c ₹ 10,000
b)
Divya’s Capital A/c Dr. ₹ 10,000
To Avya’s Capital A/c ₹ 10,000
c)
Avya’s Capital A/c Dr. ₹ 90,000
To kavya’s Capital A/c ₹ 90,000
d)
Avya’s Capital A/c Dr. ₹ 10,000
To Kavya’s Capital A/c ₹ 10,000
Anurag Pathak Changed status to publish May 5, 2023
Ans – d)
Solution:
Calculation of sacrifice/gain of partners
Old Ratio = 1 : 1 : 1
New Ratio = 4 : 3 : 2
Avya = 1/3 – 4/9 = 3 – 4/9 = – 1/9 (gain)
Divya = 1/3 – 3/9 = 3 – 3/9 = 0
Kavya = 1//3 – 2/9 = 3 – 2/9 = 1/9 (Sacrifice)
Calculation of partners’ share in the goodwill
Avya = 90,000 × 1/9 = ₹ 10,000 (debit)
Kavya = 90,000 × 1/9 = ₹ 10,000 (Credit)
Journal Entry
Avya’s Capital A/c Dr. 10,000
To Kavya’s Capital A/c 10,000
Anurag Pathak Changed status to publish May 4, 2023
