Question

X, Y and Z are partners in a firm sharing profits and losses as 5 : 4 : 3 . Their Balance Sheet as at 31st March, 2018 was:
From 1st April, 2018, they agree to alter their profit-sharing ratio as 4 : 3 : 2 .It is also decided that:
(a) Furniture be taken at 80% of its value.
(b) Stock be appreciated by 20%.
(c) Plant and Machinery be valued at ₹ 4,00,000.
(d) Outstanding Expenses be increased by ₹ 13,000.
Partners agreed that altered values are not to be recorded in the books and they also do not want to distribute the General Reserve.
You are required to pass a single journal entry to give effect to the above . Also, prepare Balance Sheet of the new firm.

Answer 1

Answer:

X, Y and Z are partners in a firm sharing profits and losses as 5 : 4 : 3

$78) {1}^{?}$

Answer 2

Debited to X's Capital = 2,500(Gain)

Credited to Y's Capital = 2,500(Sacrifice)

Explanation:

Calculation of sacrificing Ratio

Old Ratio (X,Y and Z) =5:4:3

New Ratio(X,Y and Z)= 4:3:2

Sacrificing Ratio =Old ratio - New ratio

X's Share =$\frac{5}{12}$ - $\frac{4}{9}$  = - $\frac{1}{36}$ ( Gain)

Y's Share =$\frac{4}{12}$ - $\frac{3}{9}$ = nil

Z's Share =$\frac{3}{12}$  - $\frac{2}{9}$= $\frac{1}{36}$ (Sacrifice)

Adjustment of Profit on revaluation

Debited to X's Capital =90,000×$\frac{1}{36}$= 2,500(Gain)

Credited to Y's Capital =90,000×$\frac{1}{36}$= 2,500(Sacrifice)