Question

. P, Q and R are partners sharing profit equally. They decided that in future R will get 1/5th share in profits. On the day of change, firm's goodwill is valued at * 30,000. Give journal
entries on change in profit sharing ratio.

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Answer 1

Answer:

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Explanation:

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answer in attachment~

Answer 2

Concept:

The phrase "profit sharing ratio" is frequently used in partnership-based businesses. Simply put, this is how equally the partners split the company's profits.

The new profit-sharing ratio is the percentage that both the existing and new partners of a corporation agree to divide the organization's future profit in. When a new partner enters a business, it is vital to determine the new profit-sharing ratio because, in the future, he or she will be eligible to share the profits. The profit will be split equally among all partners, old and new, if this ratio is not agreed upon at the time of the admission of a new partner.

Given:

R share in profits = 1/5

Firm's Goodwill = 30,000

Find:

Journal entries on change in profit sharing ratio

Solution:

Goodwill = 30,000

R's share is 1/5th = 30,000*1/5 = 6000

Deed is silent about old partners sharing ratio so shared equally

P's share a/c     -Dr           3000

Q's share a/c    -Dr           3000

          To R's share a/c                  6000

(Being Goodwill is charged to partners a/c)

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