Question 21:
Bootstrap and Davy Jones are partners sharing
profits in the ratio of 2:1. On 31st March, 2026, their Balance Sheet showed
General Reserve of ₹ 60,000. It was decided that in future they will
share profits and losses in the ratio of 3 : 2. Pass necessary Journal entry in
each of the following alternative cases:
(i) When General Reserve is not to be shown in the new Balance Sheet.
(ii) When General Reserve is to be shown in the new Balance Sheet.
Answer:
(i) If they do not want to show General Reserve in the new Balance Sheet
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Journal |
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Date |
Particulars |
L.F. |
Debit (₹) |
Credit (₹) |
|
|
2026 |
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|
|
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To Amar’s Capital A/c |
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|
40,000 |
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To Akhar’s Capital A/c |
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|
20,000 |
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|
(Being Adjustment of balance in General Reserve A/c in old ratio) |
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Working Notes:
WN1Calculation of Share of General Reserve
Amar's share=60,000×2/3=40,000
Akhar's share=60,000×1/3=20,000
(ii) If they want to show General Reserve in the new Balance Sheet
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Journal |
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Date |
Particulars |
L.F. |
Debit (₹) |
Credit (₹) |
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|
2026 |
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To Amar’s Capital A/c |
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4,000 |
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(Being Adjustment of balance in General Reserve A/c in sacrificing/gaining ratio) |
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Working Notes:
WN1Calculation of Gain/Sacrfice
Sacrificing Ratio=Old Ratio-New Ratio
Amar=2/3-3/5=1/15(sacrifice)
Akhar=1/3-2/5=-1/15(gain)
WN2 Calculation of Compensation by Akhar to Amar
Amount to be compensated=60,000×1/15=4,000
Question 22: Mita, Gopal and Farhan were partners sharing profits and losses in the ratio 3:2:1. On 31st March, 2018. they decided to change the profit-sharing ratio to 5: 3:2. On this date, the Balance Sheet showed deferred advertisement expenditure ₹30,000 and contingency reserve 9,000.
Goodwill was valued at ₹4,80,000. Pass the necessary Journal entries for the above transactions in the books of the firm on its reconstitution.
(CBSE 2019)
Answer;
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Journal |
||||
|
Particulars |
L.F. |
Debit (₹) |
Credit (₹) |
|
|
Mitha’s Capital A/c Gopal’s Capital A/c Farhan’s Capital A/c To Advertisement expenses a/c (BeingAdvertisement expenses A/c written off in old ratio) |
Dr. |
|
15,000 10,000 5,000
9,000
16,000 |
30,000
4,500 3,000 1,500
16,000 |
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Contingency reserve a/c |
Dr. |
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To Mitha’s Capital A/c To Gopal’s Capital A/c To Farhan’s Capital A/c (Being Contingency reserve A/c distributed in old ratio) |
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Farhan’s Capital A/c To Gopal’s Capital A/c (Being capital of gainer and sacrificer’s capital a/c adjusted with their share of goodwill in gaining and sacrificing ratio) |
Dr. |
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WN-1
|
|
Mita |
Gopal |
Farhan |
Old ratio |
3 |
: 2 |
: 1 |
New ratio |
5 |
: 3 |
: 2 |
Mita = 3/6-5/10=30-30/60=0/60
Gopal =2/6-3/10=20-18/60=2/60(Scrifice)
Farhan=1/6-2/10=10-12/60=-2/60(Gain)
Goodwill of the firm=-4,80,000
Share of Gapal =4,80,000×2/60=₹16,000
Share of Farhan =4,80,000×2/60=₹16,000
WN-2
Adjustment of deferred advertisement expenditure and contingency reserve
Advertisement expenditure to be written off / debited (in old ratio 3;2;1)
Mita = 30,000×3/6 =15,000
Gopal = 30,000×2/6 =10,000
Farhan = 30,000×1/6 = 5,000
Contingency reserve to beCredited (in old ratio 3;2;1)
Mita = 9,000×3/6 =4,500
Gopal = 9,000×2/6 =3,000
Farhan = 9,000×1/6 = 1,500
Question 23:
Ashok, Sonu and Ravi 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, 2026. 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 & Loss A/c (Credit) |
24,000 |
|
Advertisement Suspense A/c |
12,000 |
Pass an Adjustment Entry.
Answer:
|
Journal |
|||||
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Date |
Particulars |
L.F. |
Debit ₹ |
Credit ₹ |
|
|
April 1 |
Ravi’s Capital A/c |
Dr. |
|
5,400 |
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To Alok's Capital A/c |
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5,400 |
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(Being accumulated profits, losses and reserves without affecting) |
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Question 24:
Bhavya and Sakshi are partners in a firm, sharing profits and losses in the ratio of 3:2. On 31st March, 2018 their Balance Sheet was as under:
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BALANCE
SHEET OF BHAVYA AND SAKSHI |
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|
Liabilities |
(₹) |
Assets |
(₹) |
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|
Sundry Creditors |
|
13,800 |
Furniture |
16,000 |
|
General Reserve |
|
23,400 |
Land and Building |
56,000 |
|
Investment Fluctuation Fund |
|
20,000 |
Investments |
30,000 |
|
Bhavya's Capital |
|
50,000 |
Trade Receivables |
18,500 |
|
Sakshi's Capital |
40,000 |
Cash in Hand |
26,700 |
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|
|
1,47,200 |
|
1,47,200 |
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The partners have decided to change their
profit sharing ratio to 1 : 1 with immediate effect. For the purpose,
they decided that:
(i) Investments to be valued at ₹ 20,000.
(ii) Goodwill of the firm be valued at ₹ 24,000.
(iii) General Reserve not to be distributed between the partners.
You are required to pass necessary Journal entries in the books of the firm.
Show workings.
Answer:
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In the books of Bhavya and Sakshi Journal |
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Date |
Particulars |
|
L.F. |
Debit |
Credit |
|
2018 |
|
|
|
|
|
|
March 31 |
Investment Fluctuation Fund A/c |
Dr. |
|
20,000 |
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To Investments A/c |
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|
|
10,000 |
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To Bhavya’s Capital A/c |
|
|
|
6,000 |
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To Sakshi’s Capital A/c |
|
|
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4,000 |
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(Being depreciation in the value of investment provided for and excess amount distributed) |
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March 31 |
Sakshi’s Capital A/c (24,000×1/10) |
Dr. |
|
2,400 |
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|
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To Bhavya’s Capital A/c (24,000×1/10) |
|
|
|
2,400 |
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(Being adjustment for goodwill due to change in profit-sharing ratio) |
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March 31 |
Sakshi’s Capital A/c (23,400×1/10) |
Dr. |
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2,340 |
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To Bhavya’s Capital A/c (23,400×1/10) |
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2,340 |
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(Being adjustment for general reserve not distributed) |
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Working Notes:
|
Particulars |
Bhavya |
Sakshi |
|
Old Ratio |
3/5 |
2/5 |
|
New Ratio |
1/2 |
1/2 |
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Gain/Sacrifice |
(3/5 – 1/2)= 1/10 (Sacrifice) |
(2/5 – 1/2)= (-1/10) (Gain) |
Question 25:
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 10%.
Pass the necessary Journal entries for the above in the books of the firm. (CBSE 2019)
Answer;
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Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit (₹) |
Credit (₹) |
|
|
2024 |
Kunal’s Capital A/c |
Dr |
|
60,000 30,000
|
90,000 |
|
|
Uma’s Capital A/c |
Dr. |
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||
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To Hari’s Capital A/c |
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|
||
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(Being Goodwill adjusted) |
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|
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15,000
|
15,000
|
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Investment Fluctuation Reserve A/c |
Dr. |
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||
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To Investment A/c |
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||
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(Being decrease in the value of investment, adjusted in Investment Fluctuation Reserve) |
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Revaluation A/c |
Dr. |
|
5,000 |
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To Stock A/c |
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|
5,000 |
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|
(Being decrease in the value of Stock debited in revaluation a/c) |
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Profit and loss a/c |
Dr. |
|
75,000 |
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|
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To Hari’s Capital A/c |
|
|
|
37,500 |
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To Kunal’s Capital A/c |
|
|
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22,100 |
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To Uma’s Capital A/c |
|
|
|
15,000 |
|
|
(Being accumulated Profit transferred to Partners’ Capital A/c) |
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|
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|
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Hari’s Capital A/c |
Dr. |
|
2,500 |
|
|
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Kunal’s Capital A/c |
Dr. |
|
1,500 |
|
|
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Uma’s Capital A/c |
Dr. |
|
1,000 |
|
|
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To Revaluation A/c |
|
|
|
5,000 |
|
|
(Being loss of revaluation a/c is debited to partners’ capital a/c ) |
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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
Ts Grewal Solution 2026-2027
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Class 12 / Volume – I
Chapter 3 – Change in Profit-Sharing Ratio Among the Existing Partner