Question

Guru and Prakash were partners in a firm sharing profits and losses in the ratio of 7 : 3. They admitted Anu as a new partner for 1/4^th share in the profits of the firm. On the date of Anu’s admission, the Profit and Loss Account of Guru and Prakash showed a credit balance of ₹ 40,000. The necessary journal entry for its treatment will be:

पर्याय

• Particulars	Dr. Amount (₹)	Cr. Amount (₹)
  Profit and Loss А/с   ...Dr.	40,000
  To Guru’s Capital A/с		21,000
  To Prakash’s Capital A/c		9,000
  To Anu’s Capital A/с		10,000

• Particulars	Dr. Amount (₹)	Cr. Amount (₹)
  Profit and Loss А/с   ...Dr.	40,000
  To Guru’s Capital A/с		28,000
  To Prakash’s Capital A/c		12,000

• Particulars	Dr. Amount (₹)	Cr. Amount (₹)
  Guru’s Capital A/c   ...Dr.	21,000
  Prakash’s Capital A/с   ...Dr.	9,000
  Anu’s Capital A/c   ...Dr.	10,000
  To Profit and Loss A/c		40,000

• Particulars	Dr. Amount (₹)	Cr. Amount (₹)
  Guru’s Capital A/c   ...Dr.	28,000
  Prakash’s Capital A/с   ...Dr.	12,000
  To Profit and Loss A/c		40,000

Answer 1

Particulars	Dr. Amount (₹)	Cr. Amount (₹)
Profit and Loss А/с   ...Dr.	40,000
To Guru’s Capital A/с		28,000
To Prakash’s Capital A/c		12,000

Explanation:

When a new partner is admitted, the existing Profit and Loss Account (credit balance) represents accumulated profits/reserves. These belong only to the old partners in their old profit-sharing ratio.

Guru and Prakash share profits in the ratio 7 : 3

So, ₹ 40,000 will be distributed as:

Guru’s share = 40,000 × `7/10` = 28,000

Prakash’s share = 40,000 × `3/10` = 12,000

Journal Entry:

• Profit & Loss A/c is a liability (credit balance), so it must be debited to close it.
• Old partners’ capital accounts are credited.