Question

Q1. A, B and C are partners sharing profits and losses in the ratio of 2:3:4. They decided to share future profits and losses in the ratio of 4:3:2. They also decided to record the effect of the following without affecting their book values: General Reserves 40,000 Profit and Loss A/c 20,000 Advertisement Suspense A/c 15,000 You are required to give the journal entry only.

Answer 1

Answer:

Explanation:

Calculation of Net Effect of Accumulated Profits/Losses :

General Reserve(+) Profit & Loss A/c(-) Advertisement Suspense A/c

Rs.40,000 +  20,000 =60,000 - 15,000

Net Effect = 45000

Calculation  of Sacrifice or Gain :

Old Ratio of A, B and C   29:39:49

New Ratio of A, B and C    49:39:29

Sacrifice or Gain :

A =29−49=29 (Gain)

B= 39−39=0

C = 49−29=29 (Sacrifice)