Question

Sachin, Kapil and Rashmi have been sharing profits in the ratio of 3 : 2 : 1 respectively. Rashmi wants that she should share profits equally along with Sachin and Kapil, and she further wants that the change in profit-sharing ratio should be applicable retrospectively for the last three years. Other partners have no objection to this. The profits for the last three years were ₹ 60,000, ₹ 47,000 and ₹ 55,000. Record the adjustment by means of a journal entry.

Answer 1

Table showing Adjustment
Particulars	Sachin	Kapil	Rashmi
Total profits for last three years = 60,000 + 47,000 + 55,000 = 1,62,000
This Profit has already been divided in the ratio of 3 : 2 : 1 (Dr)	81,000	54,000	27,000
If Profits are shared equally: `((1,62,000)/3)` (Cr)	54,000	54,000	54,000
Net Effect	Dr. 27,000		Cr. 27,000

It is clear from the above table that Sachin has received ₹ 81,000, whereas he should have received only ₹ 54,000. Therefore, Sachin will surrender ₹ 27,000 in favour of Rashmi. No adjustment is to be made by Kapil as his profit share has remained the same.

The following adjustment entry will be passed for this purpose:

Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	Sachin’s Capital A/c  ...Dr.		27,000	-
	To Rashmi’s Capital A/c		-	27,000
	(Being excess amount paid to Sachin now corrected.)