Question

A and B were partners sharing profits equally. Since A was devoting more time to the business it was agreed that profit sharing ratio will be changed to 2 : 1 from 1st April, 2026. Following balances have been extracted from their books on this date:                                                               ₹ Capitals: A                                      5,00,000                B                                      3,00,000 General Reserve                                90,000 Profit & Loss Account (Dr.)              30,000 It is agreed between the partners that: Goodwill should be valued at ₹ 1,20,000. Profit & Loss Account (Dr.) balance is to be carried forward. Furniture (Book Value ₹ 50,000) be reduced to ₹ 30,000. Computers (Book Value ₹ 1,00,000) be reduced by ₹ 60,000.

Based on the above information, choose the correct option:

In respect of Profit & Loss (Dr.) Balance ______.

Options

• Dr. A and B by ₹ 15,000 each

• Dr. A by ₹ 20,000 and B by ₹ 10,000

• Dr. A by ₹ 5,000 and Cr. B by ₹ 5,000

• Cr. A by ₹ 5,000 and Dr. B by ₹ 5,000

Answer 1

In respect of Profit & Loss (Dr.) Balance Cr. A by ₹ 5,000 and Dr. B by ₹ 5,000.

Explanation:

Sacrifice or Gain:

`A : 1/2 - 2/3 = (3 - 4)/6 = 1/6  "Gain"`

`B : 1/2 - 1/3 = (3 - 2)/6 = 1/6  "Sacrifice"`

Since there is a Dr. Balance (loss) in P & L A/c,

Gaining partner A will be credited by : `1/6  "of"  30,000 = ₹ 5,000`

Sacrificing partner B will be debited by : `1/6  "of"  30,000 = ₹ 5,000`