A, B and C were equal partners in a firm. On 31st March, 2020, C retires from the firm and A and B decided to share future profits in the ratio of 3:2. Partners decide to record the effect of the following accumulated profits, losses and reserves without affecting their book values by passing a single entry:
General Reserve ₹ 26,000; Contingency Reserve ₹ 32,000; Profit & Loss A/c (Dr. Balance) ₹ 11,000; Advertisement Suspense A/c (Dr. Balance) ₹ 2,000.
Pass the necessary adjustment entry.
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first calculate the gaining ratio
A = 3/5-1/3 = 4/15
B = 2/5 - 1/3 = 1/15
SACRIFICE OF C = 1/3
amount to be debited to capital AC = 11,000+2, 000 = 13,000
amount to be credited = 26,000+32, 000= 58,000
net effect = 58,000-13, 000 = 45,000
gaining ratio = 4:1
A's capital AC..... Dr 36,000
B's capital AC..... Dr 9,000
to C's capital AC 45,000
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