Multiple choice

A, B and C are equal partners. They wanted to change the profit sharing ratio into 4 : 3 : 2. They raised the goodwill Rs. 90,000 but they want to immediately write it off. The effected accounts will be

  1. C's capital account debit and A's capital account credit with Rs. 10,000.

  2. B's capital account debit and A's capital account credit with Rs. 10,000.

  3. C's capital account debit and B's capital account credit with Rs. 10,000.

  4. A's capital account debit and C's capital account credit with Rs. 10,000.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Old ratio: A = 1/3, B = 1/3, C = 1/3. New ratio: A = 4/9, B = 3/9, C = 2/9. Goodwill raised = Rs. 90,000 (written off immediately). A's gain = 4/9 - 1/3 = 4/9 - 3/9 = 1/9. C's loss = 1/3 - 2/9 = 3/9 - 2/9 = 1/9. Net adjustment: A debited Rs. 10,000 (1/9 of Rs. 90,000), C credited Rs. 10,000. B has no gain or loss (3/9 - 1/3 = 0).

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