Q.X, Y and Z are partners sharing profits in the ratio 3:2:1. Z dies. The partnership deed and the continuing partners have made no separate agreement on the new profit-sharing ratio. The goodwill of the firm on the date of Z's death is valued at ₹48,000. Determine the new ratio and the gaining ratio of X and Y, and pass the journal entry adjusting Z's share of goodwill through the partners' capital accounts, without raising a Goodwill account in the books.

When nothing is agreed about the new ratio, the continuing partners are presumed to take over the deceased partner's share in their own old mutual ratio, which makes the new ratio — and, in this case, the gaining ratio too — identical to that old mutual ratio. …

Step 1 — Apply the default rule for the new ratio. Since nothing special is agreed, X and Y acquire Z's share in their own OLD mutual ratio. From the old ratio X:Y:Z = 3:2:1, the mutual ratio between X and Y alone (ignoring Z) is 3:2. So the new ratio of X and Y = 3 : 2, and — as the default rule implies — the gaining ratio also works out to be 3 : 2 (verified in Step 4 below).

Step 2 — Z's share of goodwill. Z's old share = 1/6 (from the ratio 3:2:1, total 6 parts). Z's share of the firm's ₹48,000 goodwill = 1/6 × ₹48,000 = ₹8,000.

Step 3 — Charge this to X and Y in their gaining ratio (3:2, total 5 parts).

Students sometimes assume that when no new ratio is specifically stated, the continuing partners must simply continue with the OLD three-way ratio (3:2:1) unchanged, ignoring that the deceased partner's share (1/6) needs to be reallocated. Under the default rule, the continuing …