Partners K, L, and M share profits in the ratio $5:3:2$. The firm’s net assets before L’s retirement are Rs. 8,00,000 and goodwill is Rs. 1,20,000. Upon retirement of L, the remaining partners decide to write off goodwill in sacrificing ratio $5:2$. The assets are revalued: machinery increases by Rs. 30,000 and stock decreases by Rs. 15,000. Calculate the amount that should be paid to retiring partner L.

Step-by-step solution

1. Compute the change in assets due to revaluation: $+30,000-15,000=+15,000$.
2. Add this to the original net assets to obtain new net assets: $8,00,000+15,000=8,15,000$.
3. Goodwill is transferred to the remaining partners, so L receives only his share of the new net assets.
4. Calculate L’s share using the profit sharing ratio: $\frac{3}{5+3+2}\times 8,15,000=\frac{3}{10}\times 8,15,000=2,44,500$.
5. Thus L should be paid Rs. 2,44,500.

Concept tested: Goodwill write‑off on retirement

Published 24 September 2026 · How this solution was prepared and checked