Question

A and B are partners sharing profits in the ratio of 2 : 3. They admitted C as a new partner. A surrendered `1/5`th of his share and B `1/3`rd of his share in favour of C. On this date, the Profit & Loss Account shows a Dr. Balance of ₹ 75,000 and Advertisement Suspense A/c ₹ 25,000.

Partners do not want to distribute the accumulated losses. You are required to give the adjusting entry.

Answer 1

Adjusting entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	C’s Capital A/c		28,000
	To A’s Capital A/c			8,000
	To B’s Capital A/c			20,000
	(Being adjustment for accumulated losses)

Working Note:

Calculation of sacrificing ratio:

Old Ratio of A and B = `2/5 : 3/5`

Sacrifice by A = `1/5`

A’s sacrifice = `1/5 xx 2/5`

= `2/25`

Sacrifice by B = `1/3`

B’s sacrifice = `1/3 xx 3/5`

= `3/15`

= `1/5`

= `(1 xx 5)/(5 xx 5)`

= `5/25`

Sacrificing ratio between A and B = `2/25 : 5/25` or 2 : 5

C’s Share = A’s sacrificed share + B’s sacrificed share

= `2/25 + 5/25`

= `7/25`

Calculation of total accumulated losses:

Total Accumulated Loss = 75,000 + 25,000

= `1,00,000`

C’s share of loss (Gain) =`1,00,000 xx 7/25`

= 28,000

A’s share of loss (Sacrifice) =`1,00,000 xx 2/25`

= 8,000

B’s share of loss (Sacrifice) =`1,00,000 xx 5/25`

= 20,000