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. Option 1: K's Capital A/c Dr. 13,000 P's Capital A/c Dr. 11,000 To N's Capital A/c 24,000 Option 2: K's Capital A/c Dr. 12,000 P's Capital A/c Dr. 10,000 To N's Capital A/c 22,000 Option 3: K's Capital A/c Dr. 14,000 P's Capital A/c Dr. 12,000 To N's Capital A/c 26,000 Option 4: K's Capital A/c Dr. 15,000 P's Capital A/c Dr. 13,000 To N's Capital A/c 28,000

Answer: K's Capital A/c Dr. 13,000 P's Capital A/c Dr. 11,000 To N's Capital A/c 24,000. Solution: Calculation of N's share in goodwill: Total Goodwill = Rs. 72,000 N's share = 3/9 × 72,000 = Rs. 24,000 This amount needs to be compensated to N by the continuing partners K and P. Calculation of Gaining Ratio: The gaining ratio determines how much each continuing partner benefits from the retiring partner's share. Old ratio: K : N : P = 4 : 3 : 2 After N's retirement, new ratio: K : P = 5 : 3 Gain for K = New share - Old share = 5/8 - 4/9 = (45-32)/72 = 13/72 Gain for P = New share - Old share = 3/8 - 2/9 = (27-16)/72 = 11/72 Gaining Ratio = 13 : 11 Distribution of N's goodwill share: K and P will compensate N in their gaining ratio of 13 : 11 K's contribution = 13/24 × 24,000 = Rs. 13,000 P's contribution = 11/24 × 24,000 = Rs. 11,000 Journal Entry:, Account Titles, Debit (Rs.), Credit (Rs.), K's Capital A/c Dr., 13,000, P's Capital A/c Dr., 11,000, To N's Capital A/c, 24,000, (Being N's share of goodwill adjusted through gaining partners), The correct answer is Option 1.

Partnership

Retirement/Death

Medium

common

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.

K's Capital A/c Dr. 13,000

P's Capital A/c Dr. 11,000

To N's Capital A/c 24,000

K's Capital A/c Dr. 12,000

P's Capital A/c Dr. 10,000

To N's Capital A/c 22,000

K's Capital A/c Dr. 14,000

P's Capital A/c Dr. 12,000

To N's Capital A/c 26,000

K's Capital A/c Dr. 15,000

P's Capital A/c Dr. 13,000

To N's Capital A/c 28,000

✅ Correct Option: 1

Calculation of N's share in goodwill:

Total Goodwill = Rs. 72,000

N's share = $\frac{3}{9}$ × 72,000 = Rs. 24,000

This amount needs to be compensated to N by the continuing partners K and P.

Calculation of Gaining Ratio:

The gaining ratio determines how much each continuing partner benefits from the retiring partner's share.

Old ratio: K : N : P = 4 : 3 : 2

After N's retirement, new ratio: K : P = 5 : 3

Gain for K = New share - Old share = $\frac{5}{8} - \frac{4}{9} = \frac{45-32}{72} = \frac{13}{72}$

Gain for P = New share - Old share = $\frac{3}{8} - \frac{2}{9} = \frac{27-16}{72} = \frac{11}{72}$

Gaining Ratio = 13 : 11

Distribution of N's goodwill share:

K and P will compensate N in their gaining ratio of 13 : 11

K's contribution = $\frac{13}{24}$ × 24,000 = Rs. 13,000

P's contribution = $\frac{11}{24}$ × 24,000 = Rs. 11,000

Journal Entry:

Account Titles	Debit (Rs.)	Credit (Rs.)
K's Capital A/c Dr.	13,000
P's Capital A/c Dr.	11,000
To N's Capital A/c		24,000
(Being N's share of goodwill adjusted through gaining partners)

The correct answer is Option 1.

2025: 30 May Shift 1

In the absence of any information regarding the acquisition of share in profit of the retiring/deceased partner by the remaining partners, it is assumed that they will acquire his/her share in:

2026: 24 May Shift 1

The following will not be deducted from the sum due to the retiring partner:

2026: 11 May Shift 2

On the death of a partner, his share of loss in the firm from the last balance sheet till the date of his death is transferred to:

2026: 11 May Shift 2

MOTI, CHOTI and GUDDU are partners in a firm sharing profits according to their capitals. Their capitals as on April 1, 2025 were Rs. 1,80,000; Rs. 1,40,000; and Rs. 1,40,000 respectively. MOTI retired on above date. Goodwill of the firm is valued at Rs. 92,000 and the retiring partner's share is adjusted through the capital accounts of remaining partners. Correct Journal entry for recording effect of goodwill in the books of the firm will be:

2025: 22 May Shift 1

R, S and K are partners sharing profits in the ratio 8:6:4. On the retirement of R, the new profit sharing ratio between S and K was decided to be 5:3. The Gaining ratio is -

2026: 21 May Shift 2

In the absence of any information regarding the acquisition of a share of profit of the retiring/deceased partner by the remaining partners, it is assumed that they will acquire his/her share in:

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.

Solution

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