K, N and P are partners sharing profits and losses in the ratio of 4:3:2. N retires and the goodwill is valued at Rs. 72,000. K and P decided to share future profits and losses in the ratio of 5:3. Identify the correct journal entry in this scenario.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → K's Capital A/c Dr. 13,000 and P's Capital A/c Dr. 11,000, To N's Capital A/c 24,000
The retiring partner is paid for his share of goodwill by the partners who take over his share, in their gaining ratio (new share minus old share).
N's share of goodwill = 72,000 × 3/9 = Rs. 24,000
K's gain = 5/8 − 4/9 = (45 − 32)/72 = 13/72
P's gain = 3/8 − 2/9 = (27 − 16)/72 = 11/72
Gaining ratio K : P = 13 : 11
K pays 24,000 × 13/24 = Rs. 13,000; P pays 24,000 × 11/24 = Rs. 11,000
The entry:
K's Capital A/c Dr. 13,000
P's Capital A/c Dr. 11,000
To N's Capital A/c 24,000
NCERT (2026-27 edition):
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