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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: - CBSE (Arts) Class 12 - Accountancy

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Question

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

  Is there an error in this question or solution?

APPEARS IN

Solution 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: Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio.
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