Question

Tanvi, Rani and Divya are sharing profits and losses in an agreed ratio. They decide to share profits and losses in the ratio of 5 : 2 : 3 with effect from 1st April, 2026. They also decide to record the effect of the following without affecting their book values by passing a single adjustment journal entry:

1. General Reserve ₹ 2,30,000
2. Profit & Loss A/c (Cr.) ₹ 1,20,000
3. Advertisement Suspense A/c ₹ 50,000

JOURNAL ENTRIES
Date	Particulars	L.F.	Dr. ₹	Cr. ₹
2026
April 1	Tanvi’s Capital A/c   ...Dr.		60,000
	To Divya’s Capital A/c			60,000
	(Being Adjustment made for General Reserve, Profit & Loss A/c and Advertisement Suspense A/c due to change in profit sharing ratio)

Calculate each partner's gain or sacrifice due to change in profit sharing ratio and their old profit sharing ratio.

Hint: Old Profit Share = New Profit Share + Sacrificed Share or – Gained Share.

Answer 1

Given new profit-sharing ratio:

Tanvi : Rani : Divya = 5 : 2 : 3

So new shares are:

Tanvi = `5/10`, Rani = `2/10`, Divya = `3/10`

1. Find net amount to be adjusted

General Reserve:

₹ 2,30,000

Add: P&L A/c (Cr.):

₹ 1,20,000

Less: Advertisement Suspense A/c:

₹ 50,000

Therefore:

₹ 2,30,000 + ₹ 1,20,000 − ₹ 50,000 = ₹ 3,00,000​

2. Find gain and sacrifice from adjustment entry

Given entry:

Tanvi's Capital A/c Dr. ₹ 60,000

Divya's Capital A/c Cr. ₹ 60,000

Since the net amount is an accumulated profit/reserve, the gaining partner is debited and the sacrificing partner is credited.

Therefore:

Tanvi’s gain = `(60,000)/(3,00,000) = 1/5`

Divya’s sacrifice = `1/5`

Rani has neither gained nor sacrificed.

3. Find Old Profit-Sharing Ratio

Use:

Old Share = New Share − Gain

for a gaining partner, and

Old Share = New Share + Sacrifice

for a sacrificing partner.

Tanvi

New share: `5/10 = 1/2`

Gain: `1/5`

Old share: `1/2 - 1/5 = 5/10 - 2/10 = 3/10`

Rani

No gain or sacrifice: `2/10`

Divya

New share: `3/10`

Sacrifice: `1/5 = 2/10`

Old share: `3/10 + 2/10 = 5/10`

Therefore:

Old Ratio = 3 : 2 : 5​