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X, Y And Z Share Profits as 5 : 3 : 2. They Decide to Share Their Future Profits as 4 : 3 : 3 with Effect from 1st April, 2019. on this Date the Following Revaluations Have Taken Place: - CBSE (Arts) Class 12 - Accountancy

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Question

X, Y and Z share profits as 5 : 3 : 2. They decide to share their future profits as 4 : 3 : 3 with effect from 1st April, 2019. On this date the following revaluations have taken place:

   Book Values (₹) Revised Values (₹)
Investments  22,000 25,000
Plant and Machinery  25,000 20,000
Land and Building  40,000 50,000
Outstanding Expenses  5,600 6,000
Sundry Debtors  60,000 50,000
Trade Creditors  70,000 60,000

Pass necessary adjustment entry to be made because of the above changes in the values of assets and liabilities. However, old values will continue in the books . 

Solution

Journal

Date
 

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

2019
April 1


Z’s Capital A/c


Dr.

 


760

 

 

To X’s Capital A/c

 

 

 

760

 

(Adjustment of revaluation profit made)

 

 

 

Working Notes:

WN 1 Calculation of Net Profit or Loss on Revaluation

Particulars Amount
(₹)

Increase in Investment

3,000 (Cr.)

Decrease in Plant and Machinery

(5,000) (Dr.)

Increase in Land and Building

10,000 (Cr.)

Increase in Outstanding Expenses

(400) (Dr.)

Decrease in Sunday Debtors

(10,000) (Dr.)

Decrease in Trade Creditors

10,000 (Cr.)

Profit on Revaluation

7,600 (Cr.)

WN 2 Calculation of Sacrificing (or Gaining) Ratio

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

New Ratio (X, Y and Z) = 4 : 3 : 3

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

X's share = `5/10 - 4/10 = 1/10` (sacrifice)

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

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

WN 3 Adjustment of Revaluation Profit

X will be credited by = `7,600 xx 1/10` = Rs 760

Z will be debited by = `7,600 xx 1/10` = Rs 760

  Is there an error in this question or solution?

APPEARS IN

Solution X, Y And Z Share Profits as 5 : 3 : 2. They Decide to Share Their Future Profits as 4 : 3 : 3 with Effect from 1st April, 2019. on this Date the Following Revaluations Have Taken Place: Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio.
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