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X,Y and Z are partners sharing profits in the ratio of 2:3:5 Goodwill is appearing in their books at a value of Rs. 50,000. X retires and on the day of X’s retirement, goodwill is valued at Rs 45,000. Y and Z decided to sharing to share the future profits equally. Pass necessary journal entries.?
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X,Y and Z are partners sharing profits in the ratio of 2:3:5 Goodwill ...
Journal Entries for X's Retirement and Goodwill Valuation
1. Closing of X's Capital Account
2. Distribution of Goodwill
3. Recording of New Profit Sharing Ratio
Explanation
When X retires, the partnership firm needs to close X's capital account and distribute the balance to the remaining partners, Y and Z. This is done by debiting X's Capital Account and crediting Y and Z's Capital Accounts based on their profit sharing ratio.
The goodwill of the firm is also revalued on the day of X's retirement and it is found to be Rs. 45,000 instead of the earlier value of Rs. 50,000. The difference in goodwill is distributed among the partners in their profit sharing ratio. Y and Z's Capital Accounts are debited for 1/3 of the difference and X's Capital Account is credited for the total difference.
Finally, Y and Z decide to share future profits equally, which means their profit sharing ratio changes to 1:1. This is recorded by debiting their Capital Accounts and crediting X's and Z's Capital Accounts based on their new profit sharing ratio.
1. Closing of X's Capital Account
- Debit X's Capital Account for the balance
- Credit Y's Capital Account for 2/10 of X's Capital Balance
- Credit Z's Capital Account for 3/10 of X's Capital Balance
2. Distribution of Goodwill
- Debit Y's Capital Account for 1/3 of the difference between the previous goodwill and the new goodwill
- Debit Z's Capital Account for 1/3 of the difference between the previous goodwill and the new goodwill
- Credit X's Capital Account for the total difference in goodwill
3. Recording of New Profit Sharing Ratio
- Debit Y's Capital Account for 1/10 of X's Capital Balance
- Debit Z's Capital Account for 1/10 of X's Capital Balance
- Credit X's Capital Account for 2/10 of X's Capital Balance
- Credit Y's Capital Account for 3/10 of X's Capital Balance
- Credit Z's Capital Account for 5/10 of X's Capital Balance
Explanation
When X retires, the partnership firm needs to close X's capital account and distribute the balance to the remaining partners, Y and Z. This is done by debiting X's Capital Account and crediting Y and Z's Capital Accounts based on their profit sharing ratio.
The goodwill of the firm is also revalued on the day of X's retirement and it is found to be Rs. 45,000 instead of the earlier value of Rs. 50,000. The difference in goodwill is distributed among the partners in their profit sharing ratio. Y and Z's Capital Accounts are debited for 1/3 of the difference and X's Capital Account is credited for the total difference.
Finally, Y and Z decide to share future profits equally, which means their profit sharing ratio changes to 1:1. This is recorded by debiting their Capital Accounts and crediting X's and Z's Capital Accounts based on their new profit sharing ratio.
Community Answer
X,Y and Z are partners sharing profits in the ratio of 2:3:5 Goodwill ...
(when one of the Remaining Partners Gain and Goodwill Already Appears in the Books). X, Y and Z are
partners sharing profits in the ratio of 2:3:5. Goodwill is appearing in their books at a value of Rs. 50,000. X
retires and on the day of X’s retirement, goodwill is valued at Rs. 45,000. Y and Z decided to share the
future profits equally. Pass necessary journal entries.
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X,Y and Z are partners sharing profits in the ratio of 2:3:5 Goodwill is appearing in their books at a value of Rs. 50,000. X retires and on the day of X’s retirement, goodwill is valued at Rs 45,000. Y and Z decided to sharing to share the future profits equally. Pass necessary journal entries.?
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X,Y and Z are partners sharing profits in the ratio of 2:3:5 Goodwill is appearing in their books at a value of Rs. 50,000. X retires and on the day of X’s retirement, goodwill is valued at Rs 45,000. Y and Z decided to sharing to share the future profits equally. Pass necessary journal entries.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about X,Y and Z are partners sharing profits in the ratio of 2:3:5 Goodwill is appearing in their books at a value of Rs. 50,000. X retires and on the day of X’s retirement, goodwill is valued at Rs 45,000. Y and Z decided to sharing to share the future profits equally. Pass necessary journal entries.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for X,Y and Z are partners sharing profits in the ratio of 2:3:5 Goodwill is appearing in their books at a value of Rs. 50,000. X retires and on the day of X’s retirement, goodwill is valued at Rs 45,000. Y and Z decided to sharing to share the future profits equally. Pass necessary journal entries.?.
X,Y and Z are partners sharing profits in the ratio of 2:3:5 Goodwill is appearing in their books at a value of Rs. 50,000. X retires and on the day of X’s retirement, goodwill is valued at Rs 45,000. Y and Z decided to sharing to share the future profits equally. Pass necessary journal entries.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about X,Y and Z are partners sharing profits in the ratio of 2:3:5 Goodwill is appearing in their books at a value of Rs. 50,000. X retires and on the day of X’s retirement, goodwill is valued at Rs 45,000. Y and Z decided to sharing to share the future profits equally. Pass necessary journal entries.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for X,Y and Z are partners sharing profits in the ratio of 2:3:5 Goodwill is appearing in their books at a value of Rs. 50,000. X retires and on the day of X’s retirement, goodwill is valued at Rs 45,000. Y and Z decided to sharing to share the future profits equally. Pass necessary journal entries.?.
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X,Y and Z are partners sharing profits in the ratio of 2:3:5 Goodwill is appearing in their books at a value of Rs. 50,000. X retires and on the day of X’s retirement, goodwill is valued at Rs 45,000. Y and Z decided to sharing to share the future profits equally. Pass necessary journal entries.?, a detailed solution for X,Y and Z are partners sharing profits in the ratio of 2:3:5 Goodwill is appearing in their books at a value of Rs. 50,000. X retires and on the day of X’s retirement, goodwill is valued at Rs 45,000. Y and Z decided to sharing to share the future profits equally. Pass necessary journal entries.? has been provided alongside types of X,Y and Z are partners sharing profits in the ratio of 2:3:5 Goodwill is appearing in their books at a value of Rs. 50,000. X retires and on the day of X’s retirement, goodwill is valued at Rs 45,000. Y and Z decided to sharing to share the future profits equally. Pass necessary journal entries.? theory, EduRev gives you an
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