Page 82 - DEBKVOL-1

4.14 Double Entry Book Keeping—CBSE XII
Illustration 9.
X, Y and Z are partners sharing profits in the ratio of 3 : 2 : 1. From 1st April, 2018,
Y decided to devote only part of time to the business and accepted to receive one half
of his previous share of profits. Sacrificed share of Y is taken equally by X and Z. For
this purpose, goodwill of the firm was valued at ` 3,00,000. Calculate new profit-sharing
ratio and pass an adjustment entry for treatment of goodwill due to change in the
profit-sharing ratio.

Solution:
Y’s Sacrificed Share = 2/6 × 1/2 = 1/6, which is distributed equally between X and Z.
X’s New Share = Old Share + Acquired Share
3 1 6 +1 7
= 3/6 + (1/6 × 1/2) = + = =
6 12 12 12
Y’s New Share = Old Share – Sacrificed Share
2 1 1 2
= - = or
6 6 6 12
1 1 2 +1 3
Z’s New Share = 1/6 + (1/6 × 1/2) = + = =
6 12 12 12
Hence, New Profit-sharing Ratio of X, Y and Z = 7/12 : 2/12 : 3/12 = 7 : 2 : 3.

Since Y has sacrificed 1/6th share, he will be compensated with ` 50,000
(i.e., ` 3,00,000 × 1/6) for goodwill by X and Z equally because they have gained in equal
proportion.
ADJUSTMENT ENTRY
Date Particulars L.F. Dr. (`) Cr. (`)

2018
April 1 X’s Capital A/c (` 50,000 × 1/2) ...Dr. 25,000
Z’s Capital A/c (` 50,000 × 1/2) ...Dr. 25,000
To Y’s Capital A/c 50,000
(Adjustment made for goodwill)
Illustration 10.
Ashish, Aakash and Akhil are partners sharing profits in the ratio of 5 : 3 : 2. They decided
to share profits in future in the ratio of 2 : 2 : 1 w.e.f. 1st April, 2018. Calculate the Sacrificing
and Gaining Ratio.

Solution:
Sacrificed Share = Old Share – New Share

5 2 54- 1
Ashish = - = = ( . ., Sacrifice)ie
10 5 10 10
3 2 34- 1
Aakash = - = =- ( . ., Gain)ie
10 5 10 10
2 1 22-
Akhil = - = = 0.
10 5 10