A, B & C are partners sharing profits and losses in the ratio of 3:2:1. B decides to retire and the goodwill of the firm is valued at ₹60000 on the retirement. The remaining partners decide to share the future profits and losses equally.
Pass the journal entry for treatment of B's share of goodwill.
Answer & explanation
Correct answer: option 3
Old ratio 3:2:1
New ratio after B retirement 1:1
C gain= 1/2-1/6= 2/6= 1/3
A gain= 1/2-3/6=0 means A will not get any gain.
So, B's share of goodwill is 60000*1/3= 20000
So, entry will be-
C's Capital A/c Dr... ₹20000
To B's Capital A/c ₹20000