Question

A, B and C are partners sharing profits and losses in the ratio of 1 : 2 : 3. From April 1, 2024, they decided to share the profits in the ratio of 2 : 3 : 4. On that date, Profit and Loss Account disclosed a debit balance of ₹ 90,000. Record the necessary journal entry for the distribution of the balance in the Profit and Loss Account.

Answer 1

Journal Entries
Date	Particulars	L.F.	Dr. ₹	Cr. ₹
	A's Capital A/c   ...Dr.		15,000
	B's Capital A/c   ...Dr.		30,000
	C's Capital A/c   ...Dr.		45,000
	To Profit and Loss A/c			90,000
	(Being debit balance of Profit and Loss Account distributed among partners in their old profit-sharing ratio.)

Working note:

Old profit-sharing ratio:

A : B : C = 1 : 2 : 3

The Profit and Loss Account has a debit balance of ₹ 90,000, which represents accumulated loss.

Since the partners are changing their profit-sharing ratio, this loss must be distributed among them in the old profit-sharing ratio.

Total old ratio:

1 + 2 + 3 = 6

A's share of loss

`90,000 xx 1/6 = 15,000`

B's share of loss

`90,000 xx 2/6 = 30,000`

C's share of loss

`90,000 xx 3/6 = 45,000`