Accountancy Part AReconstitution of Partnership Firm: Retirement and Death

P, Q and R share profits in the ratio of 5:4:3. R retires and the new…

P, Q and R share profits in the ratio of 5:4:3. R retires and the new ratio is 5 : 3. If R is given ₹6,000 as goodwill, journal entry will be :

Answer & explanation

Correct answer: option 2

The correct answer is option 2-
P's Capital A/c Dr.    ₹5,000
Q's Capital A/c Dr.   ₹1,000
   To R's Capital A/c       ₹6,000

Gain of P = 5/8 - 5/12
               = (15-10)/24
           = 5/24
Gain of Q = 3/8 - 4/12
               = (9-8)/24
           = 1/24
Gaining Ratio = 5:1

₹6,000 is distributed between partners in the gaining ratio 5:1. So, the following journal entry is passed for this-

P's Capital A/c Dr. ₹5,000
Q's Capital A/c Dr. ₹1,000
To R's Capital A/c ₹6,000