M, N and R are partners sharing Profit and Losses in the Ratio of 3: 3:2. They decided to change their ratio equally. On that date goodwill appearing in the Balance Sheet was ₹2,40,000. Journal Entry will be passed as:
Answer & explanation
Correct answer: option 3
The correct answer is option 3-
M's Capital A/c Dr. ₹90,000
N's Capital A/c Dr. ₹90,000
R's Capital A/c Dr. ₹60,000
To Goodwill A/c ₹2,40,000
(Goodwill adjusted on change in profit sharing ratio)
Goodwill appearing in the books will be written-off by debiting old partners ‘capital accounts in their old profit sharing ratio. Thereafter new value of goodwill will be given effect by crediting sacrificing partners' capital accounts and debiting new partners’ current account. So journal entry will be-
M's Capital A/c Dr. ₹90,000 (2,40,000 x 3/8)
N's Capital A/c Dr. ₹90,000 (2,40,000 x 3/8)
R's Capital A/c Dr. ₹60,000 (2,40,000 x 2/8)
To Goodwill A/c ₹2,40,000
(Goodwill adjusted on change in profit sharing ratio)