Question

X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 2 : 1. They decided to share future profits equally. The Profit and Loss Account showed a Credit balance of ₹ 60,000 and a General Reserve of ₹ 30,000. If these are not to be shown in balance sheet, in the journal entry:

Options

• Cr. X by ₹ 15,000; Dr. Z by ₹ 15,000

• Dr. X by ₹ 15,000; Cr. Z by ₹ 15,000

• Cr. X by ₹ 45,000; Cr. Y by ₹ 30,000; Cr. Z by ₹ 15,000

• Cr. X by ₹ 30,000; Cr. Y by ₹ 30,000; Cr. Z by ₹ 30,000

Answer 1

Cr. X by ₹ 45,000; Cr. Y by ₹ 30,000; Cr. Z by ₹ 15,000

Explanation:

Step 1: Total accumulated profits

Profit & Loss A/c (Credit) = ₹ 60,000

General Reserve = ₹ 30,000

Total = ₹ 90,000

Step 2: Distribute in the old ratio (3 : 2 : 1)

Total parts = 6

X = `90,000 xx 3/6 = 45,000`

Y = `90,000 xx 2/6 = 30,000`

Z = `90,000 xx 1/6 = 15,000`