Question

Q25) Due to change in profit sharing
ratio, Hari's gain is 1/6 th, while Ankit's
sacrifices is 1/6th. They decided to
adjust the following accumulated
profits, losses and reserves without
affecting their book figures, by
passing a single adjustment entry :-
General reserve 20000; Profit and
loss A/C (Dr.) * 40000;
Advertisement suspense Alc
10000. The necessary adjustment​

Answer 1

Explanation:

Old Ratio (A and B) = 1 : 1

New Ratio (A and B) = 4 : 3

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

∴ A’s Gain = 1/14

B’s Sacrifice = 1/14