A and B have been carrying on business in partneship with fixed capitals of Rs. 2,40,000 and Rs. 1,20,000 respectively and sharing profits in the same proportion. They decided that with effect from from April 1, 2016 they would share profits and losses in the ratio of 3 : 2. For this purpose goodwill is to be valued at three year's purchase of the average of precending three year's profits. The profits for the years ending 31st March were 2013 : Rs. 75,000, 2014 : Rs. 60,000, 2015 Rs. 80,000 and 2016 Rs. 1,30,000. Give the necessary journal entry.

Explanation

Value of Goodwill Rs. 2,70,000, Debit B's Current A/c by Rs. 18,000 and Credit A's Current A/c by Rs. 18,000.
Note : Since the capitals are fixed, adjustment will be made through current accounts.