Question

Nidhi, Pranav, and Ishu were partners in a firm sharing profits and losses in the ratio of 5 : 4 : 1. With effect from 1st April, 2024, they decided to share profits and losses in the ratio of 4 : 1 : 5. On that date, there was a debit balance of ₹ 4,00,000 in the Profit and Loss Account. The necessary journal entry to show the effect of the above will be:

Options

• Date	Particulars	Dr. Amount (₹)	Cr. Amount (₹)
  	Ishu’s Capital A/c   ...Dr.	1,60,000	−
  	To Nidhi’s Capital A/с	−	40,000
  	To Pranav’s Capital A/c	−	1,20,000

• Date	Particulars	Dr. Amount (₹)	Cr. Amount (₹)
  	Profit and Loss Capital A/c   ...Dr.	4,00,000	−
  	To Nidhi’s Capital A/c	−	2,00,000
  	To Pranav’s Capital A/c	−	1,60,000
  	To Ishu’s Capital A/c	−	40,000

• Date	Particulars	Dr. Amount (₹)	Cr. Amount (₹)
  	Nidhi’s Capital A/с   ...Dr.	2,00,000	−
  	Pranav’s Capital A/c  ...Dr.	1,60,000	−
  	Ishu’s Capital A/c  ...Dr.	40,000	−
  	To Profit and Loss A/c	−	4,00,000

• Date	Particulars	Dr. Amount (₹)	Cr. Amount (₹)
  	Nidhi’s Capital A/с   ...Dr.	40,000	−
  	Pranav’s Capital A/c  ...Dr.	1,20,000	−
  	To Ishu’s Capital A/c	−	1,60,000

Answer 1

Date	Particulars	Dr. Amount (₹)	Cr. Amount (₹)
	Nidhi’s Capital A/с   ...Dr.	2,00,000	−
	Pranav’s Capital A/c  ...Dr.	1,60,000	−
	Ishu’s Capital A/c  ...Dr.	40,000	−
	To Profit and Loss A/c	−	4,00,000

Explanation:

In the absence of any specific information about the adjustment, the balance of the Profit and Loss Account is distributed in the old ratio.

Old profit sharing ratio = 5 : 4 : 1

Distribution of Profit and Loss Debit Balance in old ratio:

Nidhi’s share = `4,00,000 xx 5/10` = 2,00,000

Pranav’s share = `4,00,000 xx 4/10` = 1,60,000

Ishu’s share = `4,00,000 xx 1/10` = 40,000