Shyam, Gagan and Ram are partners sharing profit in the ratio of 2 : 2 : 1. Their Balance Sheet as on March 31, 2017 are as under:

As Gagan got a very good break at an MNC, so he decided to retire on that date and it was decided that Shyam and Ram would share the future profits in the ratio of 5 : 3. Goodwill was valued at Rs. 70,000, Machinery at Rs. 78,000, Buildings at Rs. 1,52,000, stock at Rs. 30,000, and bad debts amounting to Rs. 1,550 were to be written off. Record journal entries in the books of the firm and prepare the Balance Sheet of the new firm.

Explanation

Working Notes
Share Gained = New Share – Old Share
Shyam’s Gain = `(5)/(8)-(2)/(5) = (25-16)/(40)=(9)/(40)`
Ram's Gain = `(3)/(8) - (1)/(5) = (15-8)/(40) = (7)/(40)`
Therefore, Gaining Ratio of Shyam and Ram = `9 : 7`.

Note: As sufficient balance is not available to pay the due amount to Gagan, the balance in his capital account is transferred to his loan account.