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X And Y Are Partners Sharing Profits in the Ratio of 2 : 1. on 31st March, 2019, Their Balance Sheet Showed General Reserve Of ₹ 60,000. - CBSE (Arts) Class 12 - Accountancy

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Question

X and Y are partners sharing profits in the ratio of 2 : 1. On 31st March, 2019, their Balance Sheet showed General Reserve of ₹ 60,000. It was decided that in future they will share profits and losses in the ratio of 3 : 2. Pass necessary Journal entry in each of the following alternative cases:
(i) When General Reserve is not to be shown in the new Balance Sheet.
(ii) When General Reserve is to be shown in the new Balance Sheet.

Solution

(i) If they do not want to show General Reserve in the new Balance Sheet

Journal

Date
 

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

2019
April 1


General Reserve A/c


Dr.

 


60,000

 

 

  To X’s Capital A/c

 

 

 

40,000

 

  To Y’s Capital A/c

 

 

 

20,000

 

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

 

 

 

Working Notes:

WN1 Calculation of Share of General Reserve

X's share = `60,000 xx 2/3 = 40,000`

Y's share = `60,000 xx 1/3 = 20,000`

(ii) If they want to show General Reserve in the new Balance Sheet

Journal

Date
 

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

2019
April 1


Y’s Capital A/c


Dr.

 


4,000

 

 

  To X’s Capital A/c

 

 

 

4,000

 

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

 

 

 

Working Notes:

WN1 Calculation of Gain/Sacrfice

Sacrificing Ratio = Old ratio - New Ratio

X = `2/3 - 3/5 = 1/5` (sacrifice)

Y = `1/3 - 2/3 = -1/15` (gain)

WN2 Calculation of Compensation by Y to X

Amount to be compensated = `60,000 xx 1/5 = 4,000`

  Is there an error in this question or solution?

APPEARS IN

Solution X And Y Are Partners Sharing Profits in the Ratio of 2 : 1. on 31st March, 2019, Their Balance Sheet Showed General Reserve Of ₹ 60,000. Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio.
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