Question

Diksha, Krish and Rajan were partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. On 1^st April, 2024, Rajan decided to retire from the firm. On that day, the balance in his capital account after making the necessary adjustments on account of reserves, revaluation of assets and reassessment of liabilities was ₹ 1,80,000. Diksha and Krish agreed to pay him ₹ 2,20,000 in full settlement of his claim.
Calculate Rajan’s share of goodwill and pass the necessary journal entries for the same.

Hint:

When a partner retires and receives more than the capital balance, the difference is treated as goodwill — to be adjusted in the gaining ratio among remaining partners.

Answer 1

Given:
Amount paid to Rajan = ₹ 2,20,000
Balance in Rajan’s Capital A/c = ₹ 1,80,000
Extra amount paid over capital = ₹ 2,20,000 – ₹ 1,80,000 = ₹ 40,000

This extra payment represents Rajan’s share of goodwill.

Old Ratio (Diksha : Krish : Rajan) = 3 : 2 : 1
Rajan’s Share = \( \frac{1}{6} \)

New Ratio (Diksha : Krish) after Rajan's retirement = 3 : 2 (as per old ratio)
Gaining Ratio = New Ratio – Old Ratio
Diksha’s gain = \( \frac{3}{5} - \frac{3}{6} = \frac{18 - 15}{30} = \frac{1}{10} \)
Krish’s gain = \( \frac{2}{5} - \frac{2}{6} = \frac{12 - 10}{30} = \frac{1}{15} \)

LCM of 10 and 15 = 30, so gaining ratio = 3 : 2

Rajan’s share of goodwill = ₹ 40,000
Thus, Diksha’s share = \( \frac{3}{5} \times 40,000 = ₹ 24,000 \)
Krish’s share = \( \frac{2}{5} \times 40,000 = ₹ 16,000 \)

Journal Entry:

Diksha’s Capital A/c     Dr.   24,000  
Krish’s Capital A/c      Dr.   16,000  
   To Rajan’s Capital A/c           40,000  
(Being Rajan’s share of goodwill adjusted in gaining ratio)