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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

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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

(₹)

2019
April 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?

APPEARS IN

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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