Question

Samta, Mamta and Geeta were partners in a firm sharing profits and losses in the ratio of 11 : 5 : 4. On 31st March, 2025 Samta died. On Samta's death, the goodwill of the firm was valued at ₹ 1,80,000. The necessary journal entry for the treatment of goodwill on Samta's death will be :

• A. A
• B. B
• C. C
• D. D

Hint:

On death of a partner:

• Deceased partner's share of goodwill = Total Goodwill × Deceased's Share
• Continuing partners compensate in their gaining ratio
• Journal Entry: Continuing Partners' Capital A/cs Dr. (in gaining ratio) \(\Rightarrow\) To Deceased Partner's Capital A/c

Remember: Deceased partner is credited, continuing partners are debited!

Answer 1

The Correct Option is D

We need to identify the correct journal entry for the treatment of goodwill on Samta's death.
Step 1: Understand the treatment of goodwill on death of a partner.
When a partner dies, the remaining partners compensate the deceased partner for their share of goodwill. The journal entry is: \[ \begin{array}{ll} \text{Continuing Partners' Capital A/cs} & \text{Dr. (in gaining ratio)} \\ \quad \text{To Deceased Partner's Capital A/c} & \text{(with deceased partner's share of goodwill)} \end{array} \] Step 2: Calculate Samta's share of goodwill.

• Total goodwill of the firm = ₹ 1,80,000
• Old profit sharing ratio = Samta : Mamta : Geeta = 11 : 5 : 4
• Total of old ratio = 11 + 5 + 4 = 20

Samta's share of goodwill = \(1,80,000 \times \frac{11}{20} = ₹ 99,000\) Step 3: Determine the gaining ratio of the continuing partners.
When a partner dies, the continuing partners gain the deceased partner's share in their gaining ratio. Unless a new ratio is specified, the gaining ratio is the same as their old ratio. Gaining ratio of Mamta and Geeta = 5 : 4 Step 4: Distribute Samta's goodwill between Mamta and Geeta in their gaining ratio.
Samta's goodwill to be compensated = ₹ 99,000

• Mamta's share = \(99,000 \times \frac{5}{9} = ₹ 55,000\)
• Geeta's share = \(99,000 \times \frac{4}{9} = ₹ 44,000\)

Step 5: Journal entry.
\[ \begin{array}{ll} \text{Mamta's Capital A/c} & \text{Dr. 55,000} \\ \text{Geeta's Capital A/c} & \text{Dr. 44,000} \\ \quad \text{To Samta's Capital A/c} & 99,000 \end{array} \] Step 6: Analyze each option.

• (A): Shows Samta's Capital A/c debited and Mamta & Geeta credited. This is incorrect; the deceased partner should be credited, not debited.
• (B): Shows Mamta (1,00,000) and Geeta (80,000) debited and Samta credited with 1,80,000. This uses the full goodwill amount, not Samta's share. Also the amounts 1,00,000 and 80,000 are in ratio 5:4 of 1,80,000, but Samta's share is only 99,000, so incorrect.
• (C): Shows Samta's Capital A/c debited and Mamta & Geeta credited with 1,00,000 and 80,000. This is completely wrong (debit to deceased, credit to continuing).
• (D): Shows Mamta (55,000) and Geeta (44,000) debited and Samta credited with 99,000. ✓ Correct.

Final Answer: (D) Mamta's Capital A/c Dr. 55,000; Geeta's Capital A/c Dr. 44,000; To Samta's Capital A/c 99,000