Question

X, Y are partners sharing profits in the ratio of 2 : 1 . On 31st March, 2018, their Balance Sheet showed General Reserve of ₹ 60,000. It was decided that in future they will share profits and losses in the ratio of 3 : 2 . Pass necessary journal entry in each of the following alternative cases:
(i) If General Reserve is not to be shown in the new Balance Sheet.
(ii) If General Reserve is to be shown in the new Balance Sheet.

Answer 1

cases:

(i) If General Reserve is not to be shown in the new Balance Sheet.

(ii) If General Reserve is to be shown in the new Balance Sheet.

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Answer 2

Amount to be compensated = 4,000.

Explanation:

1) Calculation of Gain and Sacrifice

Sacrifice Ratio =Old ratio -New ratio

X=$\frac{2}{3}$ - $\frac{3}{5}$ =$\frac{1}{15}$ ( sacrifice)

Y=$\frac{1}{3}$ - $\frac{2}{5}$ = $\frac{1}{15}$ ( Gain)

2) Calculation of compensation by Y to X

Amount to be compensated =60,000×$\frac{1}{15}$ = 4,000.