Question

X, Y and Z are sharing profits and losses in the ratio of 5 : 3 : 2 . They decided to share future profits and losses in the ratio of 2 : 3 : 5 with effect from 1st April, 2018. They also decided to record the effect of the following accumulated profits,losses and reserves without affecting their book values by passing a single entry.
Pass an Adjustment Entry.

Answer 1

Solution:

                                               Journal  

Particulars                                              Debit Rs.           Credit Its.  

Z's Capital A/c                         Dr.           5,400

     To X's Capital Ale                                                         5,400

(Being adjustment for General Reserve, Profit and Loss account and Advertisement Suspense account made on change in PSR)

Working notes :  

1.  Net amount to be adjusted = General Reserve + Profit and Loss A/c (Credit) - Adjustment Suspense A/c  

Net amount to be adjustment = 6,000 + 24,000 -12000 = Rs.18,000  

2.  Calculation of Sacrificing (or Gaining) Ratio  

Old Ratio (X, Y and Z) = 5 : 3 : 2  

New Ratio (X, Y and Z) = 2 : 3 : 5  

Sacrificing (or gaining) Ratio = Old Ratio - New Ratio  

X's Share = $\frac{5}{10} -\frac{2}{10}$ = $\frac{3}{10}$ (Sacrifice)  

Y's Share = $\frac{3}{10} -\frac{3}{10}$ = NIL

Z's Share = $\frac{2}{10} -\frac{5}{10}$ = $\frac{-3}{10}$ (Gain)    

Credited to X's Capital = 18,000 x $\frac{3}{10}$ (Sacrifice)= 5, 400  

Credited to Z's Capital = 18,000 x $\frac{3}{10}$ (Gain) = 5,400