Question

Aarushi and Gauri are partners in a firm, sharing profits and losses in the ratio of 3 : 2. On 31st March, 2024, their Balance Sheet was as under:

Liabilities	₹	₹	Assets	₹
Sundry Creditors		1,50,000	Land and Building	3,00,000
General Reserve		60,000	Investments	2,00,000
Profit and Loss A/c		80,000	Sundry Debtors	1,10,000
Investment Fluctuation Reserve		50,000	Cash in Hand	30,000
Capital A/cs:
Aarushi	1,50,000
Gauri	1,50,000	3,00,000
		6,40,000		6,40,000

The partners decided that with effect from 1st April, 2024, they would share profits and losses equally.

You are required to answer the following alternate question:

If General Reserve appearing in the Balance Sheet at 60,000 is not to be distributed, then:

Options

• Credit Aarushi and Gauri by ₹ 30,000 each

• Debit Gauri by ₹ 6,000 and Credit Aarushi by ₹ 6,000

• Debit Aarushi by ₹ 6,000 and Credit Gauri by ₹ 6,000

• Credit Aarushi by ₹ 36,000 and Gauri by ₹ 24,000

Answer 1

Debit Aarushi by ₹ 6,000 and Credit Gauri by ₹ 6,000

Explanation:

General Reserve will be changed in the sacrifice and gaining ratio because it will not be distributed as usual. The General Reserve Journal Entry will be:

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Gauri's Capital A/c   ...Dr.		6,000
	To Aarushi's Capital A/c			6,000
	(Adjustment for General Reserve)

Since Aarushi has sacrificed, she will be Credited from `1/10` of 60,000 = ₹ 6,000

Since Gauri has gained, she will be Debited from `1/10` of 60,000 = ₹ 6,000