Page 136 - DEBKVOL-1

Chapter 6 Retirement of a Partner 6.3
.
Calculation of New Profit-sharing Ratio and Gaining Ratio
Partners Old Share (i) Gaining Share (ii) New Share (i + ii)

X 4/9 1/9 5/9
Z 2/9 2/9 4/9
12 5 4
Gaining Ratio = : or 1 : 2; New Profit-sharing Ratio = : or 5 : 4.
99 9 9
Illustration 2.
Subhash, Mohan, Usha and Rinku are partners sharing profits in ratio of 3 : 2 : 3 : 2. On
the retirement of Usha, goodwill was valued at ` 2,40,000. Usha’s share of goodwill will be
given to her by adjusting it into the Capital Accounts of Subhash, Mohan and Rinku. Give
necessary entries for the treatment of goodwill when the new profit-sharing ratio is 3 : 1 : 6.

Solution: JOURNAL

Date Particulars L.F. Dr. (`) Cr. (`)
Rinku’s Capital A/c (` 2,40,000 × 4/10) ...Dr. 96,000
To Mohan’s Capital A/c (` 2,40,000 × 1/10) 24,000
To Usha’s Capital A/c (` 2,40,000 × 3/10) 72,000
(Goodwill adjusted by debiting gaining partner (Rinku for 4/10) and
crediting sacrificing partners (Mohan for 1/10 and Usha for 3/10)) (WN)

Working Note:
Calculation of Gaining Ratio: Gain of a Partner = New Share – Old Share

3 3 1 2 Ê 1 ˆ 6 2 4
Subhash’s Gain = – = 0 ; Mohan’s Gain = - =- ˜ Sacrifice; Rinku’s Gain = - = .
Á
10 10 10 10 Ë 10 ¯ 10 10 10
Thus, Rinku is the only gaining partner. She will compensate not only Usha but also Mohan,
the sacrificing partner.

Illustration 3.
X, Y and Z are partners sharing profits in the ratio of 4 : 3 : 2. Y retires on
1st April, 2017 and X and Z decide to share future profits in the ratio of 5 : 3. Then immediately
W is admitted for 3/10th share of profits half of which was gifted by X and the remaining
share was taken by W equally from X and Z. Goodwill of the firm is valued at 1,08,000. W
brings in the required amount of goodwill. The profit for the year ended 31st March, 2018 after
W‘s admission was ` 50,000. Pass the necessary Journal entries to adjust goodwill and to
distribute profits.