Question

Nita, Mita and Karan were partners in a firm sharing profits and losses in the ratio of 4 : 3 : 3. With effect from 1^st April, 2023, they agreed to share profits and losses in the ratio of 1 : 2 : 2. On that date, there was a General Reserve of ₹ 70,000 in the books of the firm. It was agreed that:

1. Goodwill of the firm be valued at ₹ 1,00,000.
2. Loss on revaluation of assets and re-assessment of liabilities amounted to ₹ 40,000.

Pass necessary journal entries for the above transactions in the books of the firm.

Answer 1

Journal Entries
Date	Particulars	L.F.	Amount Dr.	Amount Cr.
1.	General Reserve A/c   ...Dr.		70,000	-
	To Nita's Capital A/c		-	28,000
	To Mita's Capital A/c		-	21,000
	To Karan's Capital A/c		-	21,000
	(Being general reserve distributed)
2.	Mita's Capital A/c `(1,00,000 xx 1/10)`   ...Dr.		10,000	-
	Karan's Capital A/c `(1,00,000 xx 1/10)`   ...Dr.		10,000	-
	To Nita's Capital A/c `(1,00,000 xx 1/10)`		-	20,000
	(Being share of Goodwill adjusted among existing partners)
3.	Nita's Capital A/c   ...Dr.		16,000	-
	Mita's Capital A/c   ...Dr.		12,000	-
	Karan's Capital A/c   ...Dr.		12,000	-
	To Revaluation A/c		-	40,000
	(Being Loss on revaluation written off from partners' Capital A/c)

Working Note:

Calculation of describing Sacrificing/Gaining ratio

Sacrificing/Gaining ratio = Old Share − New Share

Nita = `4/10 - (1xx2)/(5xx2) = 2/10` (Sacrifice)

Mita = `3/10 - (2xx2)/(5xx2) = (-1)/10` (Gain)

Karan = `3/10 - (2xx2)/(5xx2) = (-1)/10` (Gain)