Question

Anubha and Yuvika were partners in a firm sharing profits and losses in the ratio of 3 : 2. From 1^st April 2024, they decided to share future profits and losses in the ratio of 2 : 3. On this date, their balance sheet showed a balance of ₹ 50,000 in General Reserve and a debit balance of ₹ 2,50,000 in Profit and Loss Account. Partners decided to write off Profit and Loss Account but decided not to distribute the General Reserve. Pass the necessary journal entries for the above transactions on the reconstitution of the firm. Show your workings clearly.

Answer 1

Journal
Date	Particulars	L.F.	Amount (₹)	Amount (₹)
2023
Apr. 1	Anubha’s Capital A/c    ...Dr.		1,50,000	-
	Yuvika’s Capital A/c    ...Dr.		1,00,000	-
	To Profit and Loss A/c		-	2,50,000
	(Being balance of profit and loss account written off in old ratio)

Working Notes:

1. Calculation of Gaining and Sacrificing Ratio

Old Ratio = 3 : 2

New ratio = 2 : 3

Anubha’s sacrifice = `3/5-2/5=1/5` (Sacrifice share)

Yuvika’s gain = `2/5-3/5=-1/5` (Gaining share)

2. Amount of General Reserve to be adjusted will be ₹ 50,000 × `1/5`

= ₹ 10,000

Thus, Yuvika compensates Anubha by ₹ 10,000.