Goodwill

Total capital based on C's capital is (300000 \times 6=₹1800000). Actual capital is (1450000+300000=₹1750000), so hidden goodwill is (₹50000).

Actual adjusted capital is (1030000+220000=₹1250000). Hidden goodwill is (1500000-1250000=₹250000).

Under the old ratio, A’s share was 4/9 and C’s share was 2/9. Under the new ratio, A’s share becomes 5/9 and C’s share becomes 4/9. Therefore, A’s gain is 5/9 − 4/9 = 1/9, while C’s gain is 4/9 − 2/9 = 2/9. Hence, the gaining ratio is 1/9:2/9 = 1:2. Exam tip: calculate each partner’s gain as new share minus old share; do not use the new ratio directly.

B’s old profit-sharing fraction is 3/9 = 1/3. A retiring partner is credited with his old share of the firm’s goodwill; therefore, B’s goodwill credit = ₹540000 × 1/3 = ₹180000. A and C’s new ratio is not needed to calculate B’s entitlement; it is mainly relevant for determining the gaining ratio of the continuing partners. Exam tip: For a retiring partner’s goodwill adjustment, first use the partner’s old profit-sharing ratio.

Second continuing partner's part is (180000 \times \frac{2}{3}=₹120000). On retirement debit is made in gaining ratio.

C’s share of the firm’s goodwill is calculated using the old profit-sharing ratio: 2 ÷ (3 + 5 + 2) = 1/5. Thus, ₹7,50,000 × 1/5 = ₹1,50,000 is credited to C’s Executor’s Account.

First continuing partner's part is (96000 \times \frac{7}{12}=₹56000). On death continuing partners are debited in gaining ratio.

B’s old share was 7/15, while his new share is 2/5 = 6/15. Thus, B’s share decreases by 7/15 − 6/15 = 1/15, so B sacrifices 1/15. In contrast, A’s share increases from 8/15 to 3/5 = 9/15, giving A a gain of 1/15. Exam tip: calculate sacrifice by subtracting the new share from the old share.

A’s old share was \(\frac{8}{15}\), while the new share is \(\frac{3}{5}=\frac{9}{15}\), so A gains \(\frac{1}{15}\). B’s share falls from \(\frac{7}{15}\) to \(\frac{6}{15}\), making B the sacrificing partner. The goodwill credit is therefore \(₹450000 \times \frac{1}{15}=₹30000\). Exam tip: convert both ratios to a common denominator before calculating gain or sacrifice.

B is credited (₹50000) in old ratio and debited (₹120000) in new ratio. Net effect is debit (₹70000).

The first partner's share increases from (2/10) to (3/10). The second sacrifices and the third remains unchanged.

The first partner's share increases from 2/10 under the old ratio to 3/10 under the new ratio. Thus, the gain is 3/10 − 2/10 = 1/10. In the goodwill adjustment, the gaining partner's account is debited with the amount of goodwill corresponding to this gain: ₹6,00,000 × 1/10 = ₹60,000. ₹1,80,000 is incorrect because it represents 3/10 of the total goodwill, not 1/10 gained. Exam tip: calculate new share minus old share for each partner; only a positive difference represents gain.

Fourth year's adjusted profit is (₹360000). Weighted total is (₹3200000) and total weights are (10), so average is (₹320000).

Super profit = Average Profit − Normal Profit = ₹3,60,000 − ₹2,85,000 = ₹75,000. Under the capitalization of super profit method, Goodwill = Super Profit ÷ Normal Rate of Return = ₹75,000 ÷ 15% = ₹5,00,000. ₹75,000 is only the super profit, not the value of goodwill. Exam tip: Goodwill = Super Profit × 100 ÷ Normal Rate of Return.

Capitalised value is (132000 \div 11%=₹1200000), which is less than actual capital. Therefore no positive goodwill exists.

A’s old profit share was \(\frac{7}{10}\), while under the new ratio 4:4:2, A’s share is \(\frac{4}{10}\). Therefore, A’s sacrificing share = old share − new share = \(\frac{7}{10}-\frac{4}{10}=\frac{3}{10}\). The \(\frac{2}{10}\) in option C is C’s new share, not A’s sacrifice. Exam tip: For an existing partner, sacrificing share = old share − new share.

The direct answer is option A: B’s account is debited by ₹50,000. First convert the old and new shares into fractions. B’s old share is 3/10 because A and B share 7:3. In the new ratio 4:4:2, B’s new share is 4/10. Therefore B gains 4/10 − 3/10 = 1/10. When a new partner is admitted and an existing partner gains, that gaining partner compensates the sacrificing partners; in the goodwill adjustment, the gaining partner’s account is debited. B’s amount is ₹500,000 × 1/10 = ₹50,000. Option A is correct. Option B has the wrong direction because B gains, not sacrifices. Option C uses 3/10 rather than B’s gain of 1/10. Option D ignores the goodwill adjustment. The cue is: gaining partner is debited; sacrificing partners are credited.

New partner's goodwill share is (480000 \times \frac{1}{8}=₹60000). The second old partner receives (60000 \times \frac{3}{8}=₹22500).

The bank receives ₹1,80,000 from the incoming partner and pays out ₹1,20,000 to the old partners. Therefore, the net increase in the bank balance is ₹1,80,000 − ₹1,20,000 = ₹60,000. ₹1,20,000 represents only the withdrawal, not the net increase. Exam tip: For the bank effect, subtract total payments from total receipts.

Before C’s retirement, A’s share was 5/10 and B’s share was 4/10. Under the new ratio of 3:2, A’s share becomes 3/5 = 6/10 and B’s share becomes 2/5 = 4/10. Thus, A’s gain is 6/10 − 5/10 = 1/10, while B’s gain is 4/10 − 4/10 = 0. Therefore, the gaining ratio is 1/10 : 0 = 1:0. B does not gain because his share remains unchanged. Exam tip: Gaining ratio = New share − Old share.

Direct answer: Option A is correct—Debit A ₹90,000 and credit C ₹90,000. Goodwill compensation is given to a retiring partner because that partner gives up the right to future profits. The amount is transferred to the partner who gains from the retirement. Here C retires, so C must receive credit for his goodwill share of ₹90,000. The whole benefit goes to A, so A is the gaining partner and A's capital account is debited. The entry is: A’s Capital Account Dr. ₹90,000; To C’s Capital Account ₹90,000. Option A correctly identifies both sides. Option B is wrong because B does not receive the stated gain. Option C reverses the required treatment: C is to be credited, not debited. Option D is wrong because an adjustment entry is needed even when cash is not paid. Memory cue: gaining partner is debited; retiring partner is credited.

Goodwill account is written off by the same amount by which it is raised. Therefore total debit and total credit are equal.

Add (₹20000) to first year and deduct (₹50000) from third year. Adjusted total is (₹690000) and average is (₹230000).

The old ratio 9:6 simplifies to 3:2. Therefore, A’s old share is \(3/5\), while the new share is \(4/7\). Since \(4/7 < 3/5\), A’s share decreases and A sacrifices. B’s share increases from \(2/5\) to \(3/7\), so A gains. In the exam, compare each partner’s old and new shares to identify the gaining or sacrificing partner.

The old ratio 9:6 is equivalent to 3:2, so B’s old share was 2/5 and the new share is 3/7. B’s gain is 3/7 − 2/5 = 1/35. Therefore, the amount debited to B is ₹3,50,000 × 1/35 = ₹10,000. A’s share falls from 3/5 to 4/7, making A the sacrificing partner, who will be credited with the same amount. Exam tip: Debit the gaining partner with the firm’s goodwill multiplied by that partner’s gain in share.