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# X, Y And Z Are Partners Sharing Profits and Losses in the Ratio of 7 : 5 : 4. Their Balance Sheet as at 31st March, 2019 Stood As: - CBSE (Arts) Class 12 - Accountancy

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

#### Question

XY and Z are partners sharing profits and losses in the ratio of 7 : 5 : 4. Their Balance Sheet as at 31st March, 2019 stood as:

 Liabilities Amount (₹) Assets Amount (₹) Capital A/cs: Sundry Assets 7,00,000 X 2,10,000 Y 1,50,000 Z 1,20,000 4,80,000 General Reserve 65,000 Profit and Loss A/c 25,000 Creditors 1,30,000 7,00,000 7,00,000

Partners decided that with effect from 1st April, 2019, they will share profits and losses in the ratio of 3 : 2 : 1. For this purpose, goodwill of the firm was valued at ₹ 1,50,000. The partners neither want to record the goodwill nor want to distribute the General Reserve and profits.
Pass a Journal entry to record the change and prepare Balance Sheet of the constituted firm.

#### Solution

Journal

 Date Particulars L.F. Debit Amount (₹) Credit Amount (₹) 2019April 1 X’s Capital A/c Dr. 15,000 Y’s Capital A/c Dr. 5,000 To Z’s Capital A/c 20,000 (Adjustment made for Goodwill, General Reserve and Profit and Loss Account on change in profit sharing ratio)

Balance Sheet
as on 01st April, 2019

 Liabilities Amount (₹) Assets Amount (₹) Capital A/c s: Sunday Assets 7,00,000 X 1,95,000 Y 1,45,000 Z 1,40,000 4,80,000 General Reserve 65,000 Profit and Loss A/c 25,000 Creditors 1,30,000 7,00,000 7,00,000

Working Notes:

WN 1 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X, Y and Z) = 7 : 5 : 4

New Ratio (X, Y and Z) = 3 : 2 : 1

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

X's share = 7/16 - 3/6 = (21-24)/48 = 13/48 (gain)

Y's share = 5/16 - 2/6 = (15-16)/48 = -1/48 (gain)

Z's share = 4/16 - 6/6 = (12-8)/48 = 4/48 (sacrifice)

WN 2 Adjustment of General Reserve, Profit and Loss Account and Goodwill

Total Amount for Adjustment = General Reserve + Profit and Loss Account + Goodwill

= 65,000 + 25,000 + 1,50,000 = Rs 2,40,000

Amount to be debited to X's capital = 2,40,000 xx 3/48 (share of gain)

= Rs 15,000

Amount to be debited to Y's capital = 2,40,000 xx 1/48 (share of gain)

= Rs 5,000

Amount to be credited to Z's capital = 2,40,000 xx 4/48 (share of sacrifice)

= Rs 20,000

WN 3

Partners’ Capital Accounts

 Dr. Cr. Particulars X Y Z Particulars X Y Z Z's Capital A/c 15,000 5,000 – Balance b/d 2,10,000 1,50,000 1,20,000 X's Capital A/c – – 15,000 Y's Capital A/c – – 5,000 Balance c/d 1,95,000 1,45,000 1,40,000 2,10,000 1,50,000 1,40,000 2,10,000 1,50,000 1,40,000
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 7 : 5 : 4. Their Balance Sheet as at 31st March, 2019 Stood As: Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio.
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