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X, Y And Z Are Partners Sharing Profits and Losses in the Ratio of 5 : 3 : 2, Decided to Share Future Profits and Losses - CBSE (Arts) Class 12 - Accountancy

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Question

X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2, decided to share future profits and losses equally with effect from 1st April, 2019. On that date, the goodwill appeared in the books at ₹ 12,000. But it was revalued at ₹ 30,000. Pass Journal entries assuming that goodwill will not appear in the books of account.

Solution

Journal

Date
 

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

2019
April  1


X’s Capital A/c


Dr.

 


6,000

 

 

Y’s Capital A/c

Dr.

 

3,600

 

 

Z’s Capital A/c 

Dr.

 

2,400

 

 

To Goodwill A/c

 

 

 

12,000

 

(Goodwill written off)

 

 

 

2019

Y’s Capital A/c

Dr.

 

1,000

 

April 1

Z’s Capital A/c

Dr.

 

4,000

 

 

To X’s Capital A/c

 

 

5,000

 

(Amount of goodwill adjusted on change in profit sharing ratio)

 

 

 

Working Notes:

WN 1 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X, Y and Z) = 5 : 3 : 2

New Ratio (X, Y and Z) = 1 : 1 : 1

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

X's share = `5/10 - 1/3 = (15-10)/30 = 5/10` (sacrifice)

Y's share = `3/10 - 1/3 = (9-10)/30 = (-1)/30` (gain)

Z's share = `2/10 - 1/3 = (6-10)/30 = (-4)/30` (gain)

WN 2 Writing off of Old Goodwill

X's share = `12,000 xx 5/10` = Rs 6,000

Y's share = `12,000 xx 3/10` = Rs 3,600

Z's share = `12,000 xx 5=2/10` = Rs 2,400

WN 3 Adjustment of Goodwill

Amount to be credited tp X's capital A/c = `30,000 xx 5/30`(share of sacrifice)  

                                                                 = Rs 5,000

Amount to be debited tp Y's capital A/c = `30,000 xx 1/30`(share of gain)  

                                                                 = Rs 1,000

Amount to be debited to Z's capital A/c = `30,000 xx 4/30`(share of gain)  

                                                                 = Rs 4,000

  Is there an error in this question or solution?

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Solution X, Y And Z Are Partners Sharing Profits and Losses in the Ratio of 5 : 3 : 2, Decided to Share Future Profits and Losses Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio.
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