X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2 . From 1st April, 2018, they decided to share profits and losses equally. The Partnership Deed provides that in the event of any change in the profit-sharing ratio, the goodwill should be valued at two years purchase of the average profit of the preceding five years . The profits and losses of the preceding years are: You are required to calculate goodwill and pass journal entry.

X, Y and Z are partners sharing profits and losses in the ratio of 5 :

1.	X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2 . From 1st April, 2018, they decided to share profits and losses equally. The Partnership Deed provides that in the event of any change in the profit-sharing ratio, the goodwill should be valued at two years purchase of the average profit of the preceding five years . The profits and losses of the preceding years are: You are required to calculate goodwill and pass journal entry.
Answer» n: Journal Particulars Debit Rs. CREDIT Rs. Y's Capital A/c Dr. 3,000 Z's Capital A/c Dr. 12,000 To X's Capital A/c 15,000 (Being amount of goodwill adjusted on change in PROFIT sharing ratio) Working Notes: 1. CALCULATION of Sacrificing (or Gaining) Ratio OLD Ratio ( X. Y and Z) = 5 :3 :2 New Ratio ( X, Y and Z) = 1 : 1 : 1 Sacrificing (or Gaining) Ratio = Old Ratio - New Ratio X' s Share= = = (Sacrifice) Y's Share= = = (Gain) Z's Share = = = (Gain) 2. Calculation of Goodwill AVERAGE profit = = 45, 000 Goodwill = Average Profit x Number of Year' s Purchase Goodwill = 45,000 x 2 = 90,0003. Adjustment of Goodwill Credited to X's Capital A/c =90,000 x (sacrifice) =15,000 Debited to Y's Capital A/c =90,000 x ( gain) = 13, 000 Debited to Z's Capital A/c =90,000 x (gain) = 12, 000

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