Question

Manya, Vivek and Vishal were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. With effect from 1st April, 2025, they decided to share future profits and losses in the ratio of 3 : 5 : 2. Their Balance Sheet as at 31st March, 2025, showed the following balances:

1. General Reserve ₹ 2,40,000.
2. Debit balance of ₹ 60,000 in Profit and Loss Account.

Goodwill of the firm was valued at ₹ 6,00,000, and revaluation of assets and re-assessment of liabilities resulted in a gain of ₹ 2,00,000. Partners decided to distribute the amount of the General Reserve and the Profit and Loss Account. They also decided that revalued values of assets and liabilities were not to be recorded in the books.

Pass necessary journal entries to give effect to the above.

Answer 1

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2025
April 1	General Reserve A/c   ...Dr.		2,40,000	-
	To Manya’s Capital A/c		-	1,20,000
	To Vivek’s Capital A/c		-	72,000
	To Vishal’s Capital A/c		-	48,000
	(Being General Reserve distributed in the old ratio)
April 1	Manya’s Capital A/c   ...Dr.		30,000	-
	Vivek’s Capital A/c   ...Dr.		18,000	-
	Vishal’s Capital A/c ...Dr.		12,000	-
	To Profit & Loss A/c		-	60,000
	(Being accumulated loss distributed in the old ratio)
April 1	Vivek’s Capital A/c   ...Dr.		1,60,000	-
	To Manya’s Capital A/c		-	1,60,000
	(Being Adjustment for Goodwill and Revaluation gain)

Working Note:

Net Adjustment Amount = Goodwill + Revaluation Gain

= ₹ 6,00,000 + ₹ 2,00,000

= ₹ 8,00,000

Sacrifice/Gain Calculation:

Manya = `5/10 - 3/10`

= `2/10` (Sacrifice)

Vivek = `3/10 - 5/10`

= `(-2)/10` (Gain)

Vishal = `2/10 - 2/10`

= 0

Adjustment Value = `8,00,000 xx 2/10`

= 1,60,000