A and B are partners sharing profits and losses in the ratio of 3 : 1. It was decided that with effect from 1st April, 2015 the profit sharing ratio will be 5 : 3, Goodwill is to be val ued at 2 year's purchase of average of 3 year's profits. The profits for the years ending 31st March 2013, 2014 and 2015 were Rs. 36,000, Rs. 32,000 and Rs. 40,000 respectively.
Pass necessary journal entry for the treatment of goodwill.

Explanation

Debit B by Rs. 9,000 and Credit A by 9,000.