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Jai and Raj are partners sharing profits in the ratio 3:2. With effect from 1st April, 2018, they decided to share profits equally. Goodwill apeared in the books at Rs. 25,000. As on 1st April, 2018, it was valued at Rs. 1,00,000. They decided to carry goodwill in the books of the firm.

Pass the journal entry giving effect to the above.

Journal | |||||

Date | Particulars | L.F. | DebitAmount(Rs) | CreditAmount(Rs) | |

Raj’s Capital A/c | Dr. | 7,500 | |||

To Jai’s Capital A/c | 7,500 | ||||

(Adjustment for goodwill) | |||||

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__Working Notes__

__Calculation of Gaining/Sacrificing Ratio__Sacrificing Ratio = Old Ratio ─ New Ratio

$\mathrm{Jai}=\frac{3}{5}-\frac{1}{2}=\frac{1}{10}\left(\mathrm{sacrifice}\right)\phantom{\rule{0ex}{0ex}}\mathrm{Raj}=\frac{2}{5}-\frac{1}{2}=-\frac{1}{10}\left(\mathrm{gain}\right)$

Goodwill to be adjusted = 1,00,000 ─ 25,000 = 75,000

$\mathrm{Jai}\text{'}\mathrm{s}\mathrm{share}=75,000\times \frac{1}{10}=7,500(\mathrm{credit},\mathrm{since}\mathrm{sacrificing})\phantom{\rule{0ex}{0ex}}\mathrm{Raj}\text{'}\mathrm{s}\mathrm{share}=75,000\times \frac{1}{10}=7,500(\mathrm{debit},\mathrm{since}\mathrm{gaining})$

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