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12th | Change in Profit Sharing Ratio Among the Existing Partner | Question No. 26 To 30 | Ts Grewal Solution 2023-2024

Question 26: Hari, Kunal and Uma are partners in a firm sharing profits and losses in the ratio of 5 :3: 2. From 1st April, 2018 they decided to share future profits and losses in the ratio of 2:5:3.Their Balance Sheet showed a balance of 75,000 in the Profit and Loss Account and a balance of `15,000 in Investment Fluctuation Fund. For this purpose, it was agreed that:


(i) Goodwill of the firm was valued at `3,00,000.

(ii) That investments (having a book value of `50,000) were valued at `35,000.

(iii) That stock having a book value of `50,000 be depreciated by 109%.

Pass the necessary Journal entries for the above in the books of the firm. (CBSE 2019)

 

Answer;


Journal

Date

Particulars

L.F.

Debit

 ( `)

Credit

 ( `)

2023

Kunal’s Capital A/c 

Dr

 

 60,000 30,000 

  

 

 

90,000

 

Uma’s Capital A/c

Dr.

 

 

 To Hari’s Capital A/c

 

 

 

(Being Goodwill adjusted)

 

 

 

 

 

 

 

 

15,000

 

 

 

 

15,000

 

 

Investment Fluctuation Reserve A/c

Dr.

 

 

     To Investment A/c

 

 

 

(Being decrease in the value of investment, adjusted in Investment Fluctuation Reserve)

 

 

 

 

 

 

 

 

 

Revaluation  A/c

Dr.

 

5,000

 

 

   To Stock A/c

 

 

 

5,000

 

(Being decrease in the value of Stock debited in revaluation a/c)

 

 

 

 

 

 

 

 

 

 

 

Machinery A/c

Dr.

 

12,000

 

 

Motor Cycle  A/c

Dr.

 

20,000

 

 

Creditors  A/c

Dr.

 

10,000

 

 

     To Revaluation A/c

 

 

 

42,000

 

(Being Assets revalued)

 

 

 

 

 

Profit and loss a/c

 Dr.

 

75,000

 

 

      To Hari’s Capital A/c

 

 

 

37,500

 

      To Kunal’s Capital A/c

 

 

 

22,100

 

      To Uma’s Capital A/c

 

 

 

15,000

 

(Being Profit on revaluation transferred to Partners’ Capital A/c)

 

 

 

 

 

Hari’s Capital A/c

Dr.

 

2,500 

 

 

Kunal’s Capital A/c

Dr.

 

1,500

 

 

Uma’s Capital A/c

Dr.

 

1,000

 

 

   To Revaluation A/c

 

 

 

5,000

 

(Being loss of revaluation a/c is debited to partners’ capital a/c )

 

 

 

 

 

 

 

 

 

Working notes;

 Old ratio  = Hari : Kunal : Uma = 5:3:2

New ratio  = Hari : Kunal : Uma = 2:5:3

Sacrificing ratio = Old ratio-new ratio

Hari= 5/10-2/10=5-2/10=3/10 (Sacrifice)

Kunal= 3/10-5/10=3-5/10= -2/10 (gain)

Uma= 2/10-3/10=2-3/10= -1/10 (gain)

Treatment of goodwill

Goodwill of the firm 3,00,000

Share of Hari= 3,00000×3/10 =90,000

Share of Kunal= 3,00,000×2/10 =60,000

Share of Uma= 3,00,000 ×1/10 =30,000

Question 27:


AB and C are sharing profits and losses in the ratio of 2 : 2 : 1. They decided to share profit w.e.f. 1st April, 2023 in the ratio of 5 : 3 : 2. They also decided not to change the values of assets and liabilities in the books of account. The book values and revised values of assets and liabilities as on the date of change were as follows:
 

 

Book values

( `)

 Revised values ( `)

Machinery

2,50,000

3,00,000

Computers

2,00,000

1,75,000

Sundry Creditors

90,000

75,000

Outstanding Expenses

15,000

25,000


Pass an adjustment entry.

Answer:


Journal

Date

Particulars

L.F.

Debit

 ( `)

Credit

 ( `)

2023

 

 

 

 

 

April 1

A’s Capital A/c (30,000×110=3,000)

Dr.

 

3,000

 

 

    To B’s Capital A/c

 

 

 

3,000

 

(Being Adjustment entry made for change in ratio)

 

 

 

 

 

 

 

 

 

 

 

Working Notes:

WN1: Calculation of Sacrifice or Gain

A:B:C=2:2:1(Old Ratio)

A:B:C=5:3:2(New Ratio)

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

A's share=2/5−5/10=4−5/10=−1/10(Gain)

B's share=2/5−3/10=4−3/10=1/10(Sacrifice)

C's share=1/5−2/10=2−2/10=0

WN2: Calculation of Profit or Loss on Revaluation

Revaluation A/c

Dr.

 

Cr.

Particulars

 ( `)

Particulars

 ( `)

Computers A/c

25,000

Machinery A/c

50,000

Outstanding expenses A/c

10,000

Creditors A/c

15,000

Profit on Revaluation

30,000

 

 

 

 

 

 

 

65,000

 

65,000

 

 

 

 

 

Question 28:


 Ajeet, Vijeet and Sujeet are partners in a firm sharing profits and losses in the ratio of 5:3:2.They decide to share profits and losses in the ratio of 2:5:3 with effect from 1st April, 2023. Land (having book value of Rs. 1,00,000) was found undervalued by 2,50,000 and stock (having book value of ? 4,00,000) was found overvalued by 3,00,000.

Pass the necessary adjusting entry without affecting the existing book value.

Answer:


Journal

Date

Particulars

L.F.

Debit

   `

Credit

   `

April 1 

Ajeet's Capital A/c

Dr.

 

15,000

 

 

To Vijeet's Capital A/c

 

 

 

10,000

 

To Sujeet's Capital A/c

 

 

 

5,000

 

(Being accumulated profits, losses and reserves without affecting)

 

 

 

 

 

 

 

 

 

 

Question 29:


. Rajesh and Mahesh are partners in a firm sharing profit in the ratio of 3: 2. Their Balance Sheet as at 31st March, 2023 was as follows:

Liabilities

Rs.

Assets

Rs.

Rajesh's Capital A/c

54,000

Cash

18,000

Mahesh's Capital A/c

36,000

Machinery

36,000

Creditors

36,000

Building

72,000

 

1,26,000

 

1,26,000

Goodwill of the firm is valued at 36,000 and the building at Rs. 90,000 on 31st March, 2023. The partners decide to share profits equally with effect from 1st April, 2023.

Pass the necessary accounting entries without affecting the existing figure of building.

Answer:


Journal

Date

Particulars

L.F.

Debit

   `

Credit

   `

 

Mahesh's Capital A/c

Dr.

 

3,600

 

 

To Rajesh's Capital A/c

 

 

 

3,600

 

(Being Goodwill is Raised)

 

 

 

 

 

Mahesh's Capital A/c

Dr.

 

1,800

 

 

To Rajesh's Capital A/c

 

 

 

1,800

 

(Being Goodwill is written off)

 

 

 

 

 

 

 

 

 

 

Working note:

1. Calculation of Gaining and Sacrificing Ratio

Rajesh's sacrifice = Old Profit Share - New Profit Share = 3/5 - 1/2 = 1/10

Mahesh's gain = New Profit Share - Old Profit Share = 1/2 - 2/5 = 1/10

 

2. Valued Goodwill adjusted

Share in Goodwill = 36,000×1/10=3,600

 

3. For Appreciation in Value of Building: 90,000-72,000=18,000

Share = 18,000×1/10=1,800

 

Question 30: A, B and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance Sheet as on 31st March, 2015 was as follows:


 

 

Liabilities

 ( `)

Assets

( `)

Creditors

50,000

Land

50,000

Bills Payable

20,000

Building

50,000

General Reserve

30,000

Plant

1,00,000

Capital A/cs:

 

Stock

40,000

 A

1,00,000

 

Debtors

30,000

 B

50,000

 

Bank

5,000

 C 

25,000

1,75,000

 

 

 

2,75,000

 

2,75,000

 

 

 

 


  From 1st April, 2015, A, B and C decided to share profits equally. For this it was agreed that:
(i) Goodwill of the firm will be valued at 
` 1,50,000.
(ii) Land will be revalued at  ` 80,000 and building be depreciated by 6%.
(iii) Creditors of  ` 6,000 were not likely to be claimed and hence should be written off.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the reconstituted firm.

Answer:


Revaluation Account

Dr.

Cr.

Particulars

 ( `)

Particulars

 ( `)

Building A/c

3,000

Land A/c

30,000

Revaluation Profit

 

Creditors A/c

6,000

A

16,500

 

 

 

B

11,000

 

 

 

C

5,500

33,000

 

 

 

 

 

 

 

36,000

 

36,000

 

 

 

 

 

Partners’ Capital Account

Dr.

Cr.

Particulars

A

B

C

Particulars

A

B

C

A’s Capital A/c

-

-

25,000

Balance b/d

1,00,000

50,000

25,000

Balance c/d

1,56,500

71,000

10,500

R/v Profit

16,500

11,000

5,500

 

 

 

 

General Reserve

15,000

10,000

5,000

 

 

 

 

C’s Capital A/c

25,000

-

-

 

1,56,500

71,000

35,500

 

1,56,500

71,000

35,500

 

 

 

 

 

 

 

 

 

 

Balance Sheet

as on March 31, 2015 

Liabilities

 ( `)

Assets

 ( `)

Capital A/c

 

Land

50,000

 

A

1,56,500

 

Add: Increase

30,000

80,000

B

71,000

 

Building

50,000

 

C

10,500

2,38,000

Less: Dep.

3,000

47,000

 

 

Plant

1,00,000

Creditors

50,000

 

Bank

5,000

Less: Written-off

6,000

44,000

Stock

40,000

Bills Payable

20,000

Debtors

30,000

 

 

 

 

 

3,02,000

 

3,02,000

 

 

 

 

 

Working Notes

A's share=3/6−1/3 = 1/6 (Sacrifice)

B's share=2/6−1/3 =  Nil

C's share=1/6−1/3 = -1/6 (Gain)

C will compensate by passing an entry

                           

C’s capital a/c

         To A’s capital a/c

Dr.                              

25,000

 

 

25,000

 

Ts Grewal Solution 2023-2024

Click below for more Questions

Class 12 / Volume – I

Chapter 3 – Change in Profit-Sharing Ratio Among the Existing Partner

 

Question No. 1 To 5
Question No. 6 To 10
Question No. 11 To 15
Question No. 16 To 20
Question No. 21 To 25
Question No. 26 To 30

Question No. 31 To 33