# X, Y And Z Are Partners in a Firm Sharing Profits and Losses as 5 : 4 : 3. Their Balance Sheet as at 31st March, 2019 Was: - Accountancy

Journal Entry

X, Y and Z are partners in a firm sharing profits and losses as 5 : 4 : 3. Their Balance Sheet as at 31st March, 2019 was:

 Liabilities Amount​(₹) Assets Amount​(₹) Sundry Creditors 40,000 Cash at Bank 40,000 Outstanding Expenses 15,000 Sundry Debtors 2,10,000 General Reserve 75,000 Stock 3,00,000 Capital A/cs: Furniture 60,000 X 4,00,000 Plant and Machinery 4,20,000 Y 3,00,000 Z 2,00,000 9,00,000 10,30,000 10,30,000

From 1st April, 2019, they agree to alter their profit-sharing ratio as 4 : 3 : 2. It is also decided that:
(a) Furniture be taken at 80% of its value.
(b) Stock be appreciated by 20%.
(c) Plant and Machinery be valued at ₹ 4,00,000.
(d) Outstanding Expenses be increased by ₹ 13,000.
Partners agreed that altered values are not to be recorded in the books and they also do not want to distribute the General Reserve.
You are required to pass a single Journal entry to give effect to the above. Also, prepare Balance Sheet of the new firm.

#### Solution

Journal

 Date Particulars L.F. Debit Amount (₹) Credit Amount (₹) 2019 X's Capital A/c Dr. 2,500 April 1 To Z's Capital A/c 2,500 (Revaluation Profit and General Reserve adjusted on change in profit sharing ratio)

Balance Sheet
as on 01st April, 2019

 Liabilities Amount (₹) Assets Amount (₹) Sundry Creditors 40,000 Cash at Bank 40,000 Outstanding Expenses 15,000 Sundry Debtors 2,10,000 General Reserve 75,000 Stock 3,00,000 Capital Accounts: Furniture 60,000 X 3,97,500 Plant and Machinery 4,20,000 Y 3,00,000 Z 2,02,500 9,00,000 10,30,000 10,30,000

Working Notes:

WN 1 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X, Y and Z) = 5 : 4 : 3

New Ratio (X, Y and Z) = 4 : 3 : 2

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

X's share = 5/12 - 4/9 = (15-16)/36 = -1/36 (gain)

Y's share = 4/12 - 3/9 = (12-12)/36 = Nil

Z's share = 3/12 -2/9 = (9-8)/36 = 1/36 (sacrifice)

WN 2 Calculation of Profit or Loss on Revaluation

 Particulars Amount(₹) Increase in Stock 60,000 (Cr.) Decrease Furniture (12,000) (Dr.) Decrease in Plant and Machinery (20,000) (Dr.) Increase in Outstanding Expenses (13,000) (Dr.) Profit on Revaluation 15,000 (Cr.)

WN 3 Adjustment of Profit on Revaluation and General Reserve

Amount for Adjustment = Profit on Revaluation + General Reserve
= 15,000 + 75,000 = Rs 90,000

Amount to be debited to X's capital = 90,000 xx 1/36 = Rs 2,500
Amount to be credited to Z's capital = 90,000 xx 1/36 = Rs 2,500

WN 4

Partners’ Capital Accounts

 Dr. Cr. Particulars X Y Z Particulars X Y Z Z's Capital A/c 2,500 – – Balance c/d 4,00,000 3,00,000 2,00,000 X's Capital A/c – – 2,500 Balance c/d 3,97,500 3,00,000 2,02,500 4,00,000 3,00,000 2,02,500 4,00,000 3,00,000 2,02,500
Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio
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#### APPEARS IN

TS Grewal Class 12 Accountancy - Double Entry Book Keeping Volume 1
Chapter 4 Change in Profit-Sharing Ratio Among the Existing Partners
Exercise | Q 28 | Page 43