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X, Y And Z Are Sharing Profits and Losses in the Ratio of 5 : 3 : 2. They Decide to Share Future Profits and Losses in the Ratio of 2 : 3 : 5 with Effect from 1st April, 2019. - CBSE (Arts) Class 12 - Accountancy

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Question

X, Y and Z are sharing profits and losses in the ratio of 5 : 3 : 2. They decide to share future profits and losses in the ratio of 2 : 3 : 5 with effect from 1st April, 2019. They also decide to record the effect of the following accumulated profits, losses and reserves without affecting their book values by passing a single entry .

   Book Values (₹)
 General Reserve  6,000
 Profit and Loss A/c (Credit) 24,000
 Advertisement Suspense A/c 12,000

Pass an Adjustment Entry.

Solution

Journal

 


Date
 

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

2019
April 1


Z’s Capital A/c


Dr.

 


5,400

 

 

To X’s Capital A/c

 

 

 

5,400

 

(Adjustment for General Reserve, Profit and Loss A/c and Advertisement Suspense account is made on change in profit sharing ratio)

 

 

 

Working Notes:

WN 1 

Net amount to be adjusted = General reserve + profit and loss A/c (Credit) - Advertisement suspense A/c

                                            = 6,000 + 24,000 - 12,000

                                            = Rs 18,000

WN 2 Calculation of Sacrificing (or Gaining) Ratio

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

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

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

X's share = `5/10 - 2/10 = 3/10` (sacrifice)

Y's share = `3/10 - 3/10 = "Nil"`

Z's share = `2/10 - 5/10 = (-3)/10` (gain)

Amount to be debited to X's capital = `18,000 xx 3/10` = Rs 5,400

Amount to be debited to Z's capital = `18,000 xx 3/10` = Rs 5,400

  Is there an error in this question or solution?

APPEARS IN

Solution X, Y And Z Are Sharing Profits and Losses in the Ratio of 5 : 3 : 2. They Decide to Share Future Profits and Losses in the Ratio of 2 : 3 : 5 with Effect from 1st April, 2019. Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio.
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