Question

X and Y were partners in a firm sharing profits and losses in the ratio of 2 : 1. Z was admitted for 1/3rd share in the profits. On the date of Z’s admission, the Balance Sheet of X and Y showed General Reserve of ₹ 2,50,000 and a credit balance of ₹ 50,000 in Profit and Loss Account. Pass necessary journal entries on the treatment of these items on Z’s admission.

Answer 1

Journal entries given below.

Explanation:

The ratio of profit and loss between the partners X and Y is given as 2:1.

Z is admitted with share of profits of 1/3rd.

Amount in General Reserve is given as Rs. 2,50,000

Credit Balance is given as Rs. 50,000

Calculation of Share of General Reserve & Profit & Loss A/c

To calculate the share of General Reserve and profit-loss account

= 3,00,000 $\times$ (Ratio)

X’s share

$=3,00,000 \times \frac{2}{3}=2,00,000$

Y’s share

$=3,00,000 \times \frac{1}{3}=1,00,000$