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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

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

#### 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 (₹) 2019April 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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