Q.9: L, M and N were partners in a firm sharing profits in the ratio 2:3:5. From
Ist April, 2018 they decided to share the profits in the ratio of 1:2:2. On this date
the Balance Sheet showed a credit balance of Rs 1,17,000 in general reserve and
debit balance of Rs 35,000 in Profit & Loss account. The goodwill of the firm is
valued at Rs 5 lakh. Profit arising out of revaluation is Rs 30,000. Pass journal
entries for the above transections on the reconstitution of the firm. (2)
Answers
Answer:
general reserve account .... Dr 1,17,000
to L's capital account 23,400
to M's capital account 35,100
to N's capital account 58,500
L's capital account Dr. 7000
M's capital account Dr. 10,500
N's capital account Dr. 17,500
to profit and loss account 35,000
revaluation account..... Dr 30,000
to L's capital account 6000
to M's capital account 9000
to N's capital account 15,000
sacrifice = old share - new share
L = 2/10-1/5 = nil
M = 3/10 - 2/5 = (1/10) gain
N = 5/10 - 2/5 = 1/10 sacrifice
M's capital account..... Dr. 50,000
to N's capital account 50,000
goodwill should be adjusted in gaining/sacrificing ratio if no information regarding goodiwll is given
Answer:
General Reserve A/c Dr. 1,17,000
To L 23,400
To M 35,100
To N 58,500
(General reserve transfer to partner’s capital account)
L Dr. 7,000
M Dr. 10,500
N Dr. 17,500
To Profit and Loss A/c 35,000
(Balance of profit and loss account distributed)
Revaluation A/c Dr. 30,000
To L 6,000
To M 9,000
To N 15,000
(Transfer of profit on revaluation to the capital accounts of partners in old ratio)
M Dr. 50,000
To N 50,000
(Goodwill adjustment for revaluation of assets and liabilities and goodwill on charge in profit sharing ratio)
Explanation:
Working Note:-
Sacrificing Ratio = Old Ratio - New Ratio
L’s Sacrificing Ratio = 2/10-1/5 = Nil
M’s Sacrificing Ratio = 3/10- 2/5=-1/10 (Gain)
N’s Sacrificing Ratio = 5/10 - 2/5=1/10 (Sacrifice)