A, B and C Shared Profits and Losses in the Ratio of 3 : 2 : 1 Respectively. With effect from 1st April, 2019, they Agreed to Share Profits equally - Bzziii

A, B and C shared profits and losses in the ratio of 3 : 2 : 1 respectively. With effect from 1st April, 2019, they agreed to share profits equally. The goodwill of the firm was valued at ₹ 18,000. Pass necessary Journal entries when: (a) Goodwill is adjusted through Partners' Capital Accounts; and (b) Goodwill is raised and written off.

Partner A, B,and C's Old Ratio = 3:2:1

Partner A, B,and C's New Ratio = 1:1:1

Sacrificing/Gaining Ratio = Old Ratio - New Ratio

Partner A's Share = `3/6` - `1/3` = `"3 - 2"/"6"` = `1/6` [sacrifice]

Partner Y's Share = `2/6` - `1/3` = `"2 - 2"/"6"` = Nil

Partner Z's Share = `1/6` - `1/3` = `"1 - 2"/"6"` = `-1/6` [Gain]

∴ Partner A's Sacrifice = `1/6`

Partner C's Gain = `1/6`

Journal Entries for Case (A)

Journal

Date	Particular		L.F.	Debit Amount (₹)	Credit Amount (₹)
2019 April 1	C’s Capital A/c (18,000×1/6)	Dr.		3,000
	To A’s Capital A/c (18,000×1/6)				3,000
	(Being Adjustment for goodwill)

Journal Entries for Case (B)

Journal

Date	Particular		L.F.	Debit Amount (₹)	Credit Amount (₹)
2019
April 1	Goodwill A/c	Dr.		18,000
	To A’s Capital A/c (18,000×3/6)				9,000
	To B’s Capital A/c (18,000×2/6)				6,000
	To C’s Capital A/c (18,000×1/6)				3,000
	(Being goodwill raised in the books)
	A’s Capital A/c (18,000×1/3)	Dr.		6,000
	B’s Capital A/c (18,000×1/3)	Dr.		6,000
	C’s Capital A/c (18,000×1/3)	Dr.		6,000
	To Goodwill A/c				18,000
	(Being goodwill so raised written off)