Sarthaks Test
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P, Q and R were partners sharing profits in the ratio of 2:1:1. Q retired and the new profit-sharing ratio between P and R was equal. On Q’s retirement, the goodwill of the firm was valued at Rs.40,000. Pass necessary Journal entry for the treatment of goodwill without opening Goodwill Account on Q’s retirement.

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Working Note :

1. calculation of gaining ratio

old ratio (P,Q and R ) = 2:1:1

Q retires from the firm 

New Ratio (p and R) = 1 : 1:1

gaining ratio = New ratio - old ratio

2. Adjustment of goodwill

goodwill of the firm = Rs.40,000

This share of goodwill is to be debited to R's capital account.

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