A, B and C are partners sharing profits in the ratio of 3 : 4 : 5. B retires and the goodwill of the firm is valued at ₹ 42,000. A and C decide to share profits in the ratio of 3 : 4. Journal entry will be:

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A’s Capital A/c ...Dr. 7,500 C’s Capital A/c ...Dr. 6,500 To B’s Capital A/c 14,000 Explanation: Old Ratio = 3 : 4 : 5 New Ratio = 3 : 4 Goodwill of the firm = ₹ 42,000 Gaining Ratio = New ratio – Old Ratio A = $\frac{3}{7}$-$\frac{3}{12}$=(36-21)/84=$\frac{15}{84}$ C = $\frac{4}{7}$-$\frac{5}{12}$=(40-35)/84=$\frac{13}{84}$ Gaining Ratio = $\frac{15}{84}$:$\frac{13}{84}$ Gaining Ratio = 15 : 13 B’s share on Goodwill = 42,000xx4/12 = 14,000 A’s share = 14,000xx15/28 = 7,500 C’s share = 14,000xx13/28 = 6,500

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