Page 146 - DEBKVOL-1

Chapter 6 Retirement of a Partner 6.13
.
Illustration 13. (Admission-cum-Retirement: Revaluation of Assets).
Ram and Shyam are partners sharing profits and losses in the ratio of 3 : 2. They are doing
the business of recycling the old furniture and refurbishing them for resale. On 1st April, 2018,
Shiv is admitted for 1/2 share in profits and brings ` 2,00,000 for his share of capital and
` 60,000 for his share of goodwill. On the same date, Shyam retires from the firm. Ram and Shiv
decided to share future profits equally. For this purpose assets were revalued from ` 10,00,000
to ` 9,00,000. Ram and Shiv decided to open a charitable dispensary to provide free medical
facilities to poor and needy people of flood affected victims of Bihar.
Journalise.
Solution: JOURNAL

Date Particulars L.F. Dr. (`) Cr. (`)
2018
April 1 Revaluation A/c ...Dr. 1,00,000
To Assets A/c 1,00,000
(Decrease in value of assets)
April 1 Ram’s Capital A/c ...Dr. 60,000
Shyam’s Capital A/c ...Dr. 40,000
To Revaluation A/c 1,00,000
(Revaluation loss distributed among old partners in their old ratio)
April 1 Bank A/c ...Dr. 2,60,000
To Shiv’s Capital A/c 2,00,000
To Premium for Goodwill A/c 60,000
(Amount brought in by Shiv)
April 1 Premium for Goodwill A/c ...Dr. 60,000
To Ram’s Capital A/c (` 60,000 × 1/5) 12,000
To Shyam’s Capital A/c (` 60,000 × 4/5) 48,000
(Sacrificing partners compensated with share of goodwill)

Working Note:
Calculation of Gaining/Sacrificing Share: Ram Shyam Shiv
New Share 1/2 ... 1/2
Old Share 3/5 2/5 ...
–1/10 –2/5 or –4/10 1/2 or 5/10
Sacrifice Sacrifice Gain
Illustration 14.

M, N and O are partners in a firm sharing profits in the ratio of 4 : 3 : 2. N retires and it is
decided that N’s share of goodwill be adjusted in the accounts of M and O. Fill in the missing
figures in the following Journal entry. Also calculate the value of firm’s goodwill.
JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)

M’s Capital A/c ...Dr. ?
O’s Capital A/c ...Dr. 10,000
To N’s Capital A/c ?
(N’s share of goodwill debited to the account of gaining partners in
their gaining ratio)