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Bhavya and Sakshi Are Partners in a Firm, Sharing Profits and Losses in the Ratio of 3 : 2. on 31st March, 2018 Their Balance Sheet Was as Under: - CBSE (Arts) Class 12 - Accountancy

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Question

Bhavya and Sakshi are partners in a firm, sharing profits and losses in the ratio of 3 : 2. On 31st March, 2018 their Balance Sheet was as under:

BALANCE SHEET OF BHAVYA AND SAKSHI
as at 31st March, 2018
Liabilities Amount
(₹)
Assets Amount
(₹)
Sundry Creditors   13,800 Furniture 16,000
General Reserve   23,400 Land and Building 56,000
Investment Fluctuation Fund   20,000 Investments 30,000
Bhavya's Capital   50,000 Trade Receivables 18,500
Sakshi's Capital 40,000 Cash in Hand 26,700
  1,47,200     1,47,200 
       

The partners have decided to change their profit sharing ratio to 1 : 1 with immediate effect. For the purpose, they decided that:
(i) Investments to be valued at ₹ 20,000.
(ii) Goodwill of the firm be valued at ₹ 24,000.
(iii) General Reserve not to be distributed between the partners.
You are required to pass necessary Journal entries in the books of the firm. Show workings.

Solution

In the books of bhavya and sakshi

Journal

Date

Particulars

 

L.F.

Debit
Amount

(₹)

Credit
Amount

(₹)

2018

 

 

 

 

 

March 31

Investment Fluctuation Fund A/c

Dr.

 

20,000

 

 

  To Investments A/c

 

 

 

10,000

 

  To Bhavya’s Capital A/c

 

 

 

6,000

 

  To Sakshi’s Capital A/c

 

 

 

4,000

 

(Being depreciation in the value of investment provided for and excess amount distributed)

 

 

 

 

March 31

Sakshi’s Capital A/c (24,000×1/10)

Dr.

 

2,400

 

 

To Bhavya’s Capital A/c (24,000×1/10)

 

 

 

2,400

 

(Being adjustment for goodwill due to change in profit-sharing ratio)

 

 

 

 

March 31

Sakshi’s Capital A/c (23,400×1/10)

Dr.

 

2,340

 

 

To Bhavya’s Capital A/c (23,400×1/10)

 

 

 

2,340

 

(Being adjustment for general reserve not distributed)

 

 

 

 

Working Notes:

Particulars

Bhavya

Sakshi

Old Ratio

3/5

2/5

New Ratio

1/2

1/2

Gain/Sacrifice

(3/5 – 1/2)= 1/10 (Sacrifice)

(2/5 – 1/2)= (-1/10) (Gain)

  Is there an error in this question or solution?

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Solution Bhavya and Sakshi Are Partners in a Firm, Sharing Profits and Losses in the Ratio of 3 : 2. on 31st March, 2018 Their Balance Sheet Was as Under: Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio.
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