Question

A, B and C are partners sharing profits in the ratio of 5 : 3: 2. C retires and the goodwill is valued at Rs. 40,000. Give entries in the books of the firm regarding treatment of goodwill.

Answer 1

C’s share of goodwill = 40,000 × \(\frac{2}{10}\) Rs. = 8,000

New ratio between A and B will be = 5 : 3

A's capital Account Dr.  5,000

B's Capital Account Dr. 3,000

  To C's capital                8,000

(Being C's share of goodwill credited to his a/c)