Question

X, Y and Z are partners sharing profits and losses in the ratio of 3 : 2 : 1. Y retires selling his share to X and Z for 1,60,000, 1,00,000 being paid by X and ₹ 60,000 by Z. The profit for the year after Y’s retirement is ₹ 2,40,000.

Pass entries to (a) record the sale of Y’s share to X and Z, and (b) distribute the profit between X and Z.

Answer 1

Journal entries
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
(1)	X’s Capital A/c       ...Dr.		1,00,000
	Z’s Capital A/c       ...Dr.		60,000
	To Y’s Capital A/c			1,60,000
	(Being Sale of Y’s share to X and Z in gaining ratio of 5 : 3)
(2)	Profit and Loss Appropriation A/c       ...Dr.		2,40,000
	To A’s Capital A/c			1,70,000
	To C’s Capital A/c			70,000
	(Being Profit distributed after B's retirement in their new ratio i.e., 17 : 7)

Calculation of new profit sharing ratio:

X and Z purchased Y’s share for ₹ 1,60,000, out of which X pays 1,00,000 and C pays ₹ 60,000, i. e., X and Z will share Y’s share of profit in the ratio of 1,00,000: 60,000 = 10 : 6 = 5 : 3.

Y’s new share = `3/6+(2/6xx5/8)=3/6+5/24=(12+5)/24=17/24`

Z’s new share = `1/6+(2/6xx3/8)=1/6+3/24=(4+3)/24=7/24`

New share = 17 : 7