A and B are partners in a firm sharing profits in the ratio of 2 : 1 . They decided with effect from 1st April, 2017, that they would share profits in the ratio of 3 : 2 . But, this decision was taken after the profit for the year 2017-18 amounting to Rs. 90,000 was distributed in the old ratio. Value of firm’s goodwill was estimated on the basis of aggregate of two years profits preceding the date decision became effective. The profits for 2015-16 and 2016-17 were Rs.60,000 and Rs. 75,000 respectively. It was decided that Goodwill Account will not be opened in the books of the firm and necessary adjustment be made through Capital Accounts which, on 31st March, 2018 stood, at Rs. 1,50,000 for A and Rs. 90,000 for B. Pass necessary journal entries and prepare Capital Accounts.
