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A, B And C Who Are Presently Sharing Profits and Losses in the Ratio of 5 : 3 : 2 Decide to Share Future Profits and Losses in the Ratio of 2 : 3 : 5. - CBSE (Arts) Class 12 - Accountancy

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Question

A, B and C who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in the ratio of 2 : 3 : 5. Give the journal entry to distribute 'Investments Fluctuation Reserve' of ₹ 20,000 at the time of change in profit-sharing ratio, when investment (market value ₹ 95,000) appears in the books at ₹ 1,00,000.

Solution

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

Investment Fluctuation Reserve A/c

Dr.

 

5,000

 

 

  To Investments A/c

 

 

5,000

 

(Adjustment for decrease in the value of investments)

 

 

 

 

Investment Fluctuation Reserve A/c

Dr.

 

15,000

 

 

  To A’s Capital A/c

 

 

 

7,500

 

  To B’s Capital A/c

 

 

 

4,500

 

  To C’s Capital A/c

 

 

 

3,000

 

(Adjustment of balance in Investment Fluctuation Reserve A/c in old ratio)

 

 

   

Working Notes:
WN1 Calculation of Share of Investment Fluctuation Reserve

A's share = `15,000 xx 5/10 = 7,500`

B's share = `15,000 xx 3/10 = 4,500`

C's share = `15,000 xx 2/10 = 3,000`

  Is there an error in this question or solution?

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Solution A, B And C Who Are Presently Sharing Profits and Losses in the Ratio of 5 : 3 : 2 Decide to Share Future Profits and Losses in the Ratio of 2 : 3 : 5. Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio.
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