Question

A and B are partners in a firm sharing profits in the ratio of 3 : 2. They decided to share profits in the ratio of 3 : 4 w.e.f., April 1, 2024. On that date there was a credit balance of ₹ 70,000 in their Profit and Loss Account. Pass the necessary journal entry assuming that partners decide to distribute the profits.

Answer 1

Old profit-sharing ratio:

A : B = 3 : 2

Since the Profit and Loss Account has a credit balance of ₹ 70,000, it represents accumulated profit. If the partners decide to distribute it, it is distributed in the old profit-sharing ratio, not the new ratio.

A's share

`70,000 xx 3/5 = 42,000`

B's share

`70,000 xx 2/5 = 28,000`

Journal Entries
Date	Particulars	L.F.	Dr. ₹	Cr. ₹
	Profit and Loss A/c   ...Dr.		70,000
	To A's Capital A/c			42,000
	To B's Capital A/c			28,000
	(Being credit balance of Profit and Loss Account distributed among partners in the old profit-sharing ratio.)