# 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: - Accountancy

Journal Entry

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:

 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. DebitAmount (₹) CreditAmount (₹) 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)
Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio
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#### APPEARS IN

TS Grewal Class 12 Accountancy - Double Entry Book Keeping Volume 1
Chapter 4 Change in Profit-Sharing Ratio Among the Existing Partners
Exercise | Q 20 | Page 40