Question

X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2 . With effect from 1st April, 2018, they decided to share future profits equally. On the date of change in the profit-sharing ratio, the Profit and Loss Account showed a credit balance of ₹ 1,50,000. Record the necessary journal entry for the distribution of the balance int he Profit and Loss Account immediately before the change in the profit-sharing ratio.

Answer 1

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Account showed a credit balance of ₹ 1,50,000. Record the necessary journal entry for the distribution of the balance int he Profit and Loss Account immediately before the change in the profit-sharing ratio.

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Answer 2

Solution:

                                                   Journal  

Particulars                                          Debit Rs.           Credit Rs.

Profit and Loss A/c              Dr.         1,50,000

          To X's Capital A/c                                               90,000

          To Y's Capital A/c                                               60,000

(Being adjustment of balance in PandL A/c in old ratio)  

Working Notes:

Calculation of Share of Profit and Loss A/c :

Credited to X' s share =1,50,000 x $\frac{3}{5}$ =  90, 000

Credited to Y' s share - 1,50, 000 x $\frac{2}{5}$ = 60, 000