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.
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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)
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