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Pass Necessary Journal Entries Regarding Adjustment of Reserve and Accumulated Profit/Loss. - Accountancy

Journal Entry

X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 1st April, 2019, they admit Z as a partner for 1/5th share in profits. On that date, there was a balance of ₹ 1,50,000 in General Reserve and a debit balance of ₹ 20,000 in the Profit and Loss Account of the firm. Pass necessary Journal entries regarding adjustment of reserve and accumulated profit/loss.

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Solution

Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

2019
April 1


General Reserve A/c


Dr.

 


1,50,000

 

 

  To X’s Capital A/c

 

 

 

90,000

 

  To Y’s Capital A/c

 

 

 

60,000

 

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

 

 

 

 

 

 

 

 

 

 

 

X’s Capital A/c

Dr.

 

12,000

 

 

Y’s Capital A/c

Dr.

 

8,000

 

 

  To Profit and Loss A/c

 

 

 

20,000

 

(Adjustment of debit balance in P&L A/c in old ratio)

 

 

 

 

Working Notes:
WN1 Calculation of Share of General Reserve
X's Share = 1,50,000 x `3/5` = 90,000

Y's Share = 1,50,000 x `2/5` = 60,000

WN2 Calculation of Share of Debit Balance in P&L A/c

X's Share = 20,000 x `3/5` = 12,000

Y's Share = 20,000 x `2/5` =  8,000

Concept: Adjustment for Accumulated Profits and Losses
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APPEARS IN

TS Grewal Class 12 Accountancy - Double Entry Book Keeping Volume 1
Chapter 5 Admission of a Partner
Exercise | Q 59 | Page 93
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