Question

Aamir, Bashir, and Chirag were partners in a firm sharing profits and losses in the ratio \(3 : 3 : 2\). Chirag retired. Aamir and Bashir decided to share profits and losses in future in the ratio \(1 : 2\). On the day of Chirag’s retirement, goodwill of the firm was valued at \rupee5,40,000. Calculate gaining ratio and pass necessary journal entry to record the treatment of goodwill (without opening goodwill account) on Chirag’s retirement.

Hint:

When goodwill is adjusted without opening a goodwill account, the retiring partner’s share is directly debited or credited to the gaining partners’ capital accounts based on the gaining ratio.

Answer 1

Step 1: Calculation of Gaining Ratio - Old ratio of Aamir, Bashir, and Chirag = \(3 : 3 : 2\).
- Aamir’s old share = \(\frac{3}{8}\),
Bashir’s old share = \(\frac{3}{8}\),
Chirag’s old share = \(\frac{2}{8}\).
- New ratio of Aamir and Bashir = \(1 : 2\).
- Aamir’s new share = \(\frac{1}{3}\), Bashir’s new share = \(\frac{2}{3}\). \[ \text{Gaining Ratio} = \text{New Share} - \text{Old Share} \] - Aamir’s gain = \(\frac{1}{3} - \frac{3}{8} = \frac{8}{24} - \frac{9}{24} = -\frac{1}{24}\) (no gain, hence not contributing).
- Bashir’s gain = \(\frac{2}{3} - \frac{3}{8} = \frac{16}{24} - \frac{9}{24} = \frac{7}{24}\).
Hence, the entire adjustment of goodwill will be borne by Bashir. Step 2: Calculation of Goodwill
- Total goodwill of the firm = \rupee5,40,000.
- Chirag’s share of goodwill = \(\frac{2}{8} \times 5,40,000 = \rupee1,35,000\).
Journal Entry: \[ \text{Journal Entries in the Books of the Firm:} \] \begin{center} \begin{tabular}{|l|p{6cm}|c|r|} \hline Date & Particulars & L.F. & Amount (\rupee)
\hline 2025-01-14 & Bashir’s Capital A/c Dr. & & 1,35,000
\cline{2-4} & \quad To Chirag’s Capital A/c & & 1,35,000
\cline{2-4} & \multicolumn{3}{|l|}{(Being Chirag’s share of goodwill adjusted through Bashir’s account as per gaining ratio)}
\hline \end{tabular} \end{center}