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A, B And C Are Sharing Profits and Losses in the Ratio of 2 : 2 : 1. - CBSE (Arts) Class 12 - Accountancy

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Question

A, B and C are sharing profits and losses in the ratio of 2 : 2 : 1. They decided to share profit w.e.f. 1st April, 2019 in the ratio of 5 : 3 : 2. They also decided not to change the values of assets and liabilities in the books of account. The book values and revised values of assets and liabilities as on the date of change were as follows:​

  Book values (₹)  Revised values (₹)
Machinery 2,50,000 3,00,000
Computers 2,00,000 1,75,000
Sundry Creditors 90,000 75,000
Outstanding Expenses 15,000 25,000

Pass an adjustment entry.

Solution

Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

2019

 

 

 

 

 

April 1

A’s Capital A/c (30,000×110=3,000)

Dr.

 

3,000

 

 

    To B’s Capital A/c

 

 

 

3,000

 

(Adjustment entry made for change in ratio)

 

 

 

 

Working Notes:

WN1: Calculation of Sacrifice or Gain

A : B : C = 2 : 2 : 1(old ratio)

A : B : C = 5 : 3 : 2 (new ratio)

Sacrificing (or gaining ratio) = Old ratio - New ratio

A's share = `2/5 - 5/10 = (4-45)/10 = 1/10` (gain)

B's share = `2/5 - 3/10 = (4-3)/10 = 1/10` (sacrifice)

C's share = `1/5 - 2/10 = (2-2)/10 = 0`

WN2: Calculation of Profit or Loss on Revaluation

Revaluation A/c

Dr.

 

Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

Computers A/c

25,000

Machinery A/c

50,000

Outstanding expenses A/c

10,000

Creditors A/c

15,000

Profit on Revaluation

30,000

 

 

 

65,000

 

65,000

  Is there an error in this question or solution?

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Solution A, B And C Are Sharing Profits and Losses in the Ratio of 2 : 2 : 1. Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio.
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