[ISC] Q. 45 Solution of Retirement of Partner TS Grewal ISC 2023-24 Edition

Arjun, Bhim and Nakul are partners sharing profits and losses in the ratio of 4 : 3 : 1. It is provided under the partnership deed that on the retirement of any partner his share of goodwill is to be valued at one half of the net profits credited to his account during the last 4 completed years and share of profit to the date of retirement is to be based on the average profit of the last three completed years, plus 10% (books of account are closed on 31st March).

Bhim retired on 12th June, 2022. The firm’s profits for the last 4 completed years were as follows: I (Profits ₹ 1,20,000); II (Profits ₹ 60,000); III (Losses ₹ 20,000) and IV (Profits ₹ 80,000).

Pass Journal entries to adjust Bhim’s Share of Goodwill and Profit assuming that profit-sharing ratio between Arjun and Nakul in future will be 3 : 2.