Share

# 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

ConceptRetirement and Death of a Partner - Calculation of New Profit Sharing Ratio

#### 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 (₹) 2019April 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 (₹) 2019April 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.
S