Question

8. X, Y and Z are partners in a firm sharing profits in 5:2:3 ratio. Their Balance Sheet on 31.3.2019
showed a balance of 60,000 in General Reserve. From 1.4.2019 they will share profits equally,
Record the necessary Journal entry to give effect to the above arrangement when X, Y and Z
decided not to close the General Reserve Account.
(Ans. Y's Capital A/c Debit 8,000, Z's Capital A/c Debit 2,000, X's Capital A/c Credit 10,000]​

Answer 1

Explanation:

(i) General Reserve a/c.... Dr. 36000

Contingency Reserve a/c.... Dr. 6000

Profit and loss a/c... Dr. 18000

To X's Capital a/c 30000

To Y's Capital a/c 18000

To Z's Capital a/c 12000

(Being undistributed reserves adjusted with the partners in the ratio of 5:3:2)

(ii) X's Capital a/c.... Dr. 12000

Y's Capital a/c... Dr. 7200

Z's Capital a/c... Dr. 4800

To Advertisement Suspense a/c 24000

(Being advertisement suspense distributed among the partners in the ratio of 5:3:2)