Question

C, D and E are partners sharing profits and losses in the proportion of 1/2, 1/3 and 1/6. D retired, and the new profit sharing ratio between C and E is 3:2 and the Reserves of Rs. 24,000 is divided amoung the partners in the ratio __________.

• A. 4000 : 8000 : 12000
• B. 10000 : 10000 : 4000
• C. 8000 : 12000 : 4000
• D. 12000 : 8000 : 4000

Answer 1

The correct option is D 12000 : 8000 : 4000

At the time of retirement, partner's capital account is credited with any existing profit, profit on revaluation, existing reserves etc.

in the given question profit sharing ratio of C, d and E is 1/2, 1/3 and 1/6 i.e.,

3 : 2 : 1 (on taking LCM)

Journal entry for distribution for reseves is:

Reserves A/c Dr. 24000

To C's capital A/c 12000

To D's capital A/c 8000

To E's capital A/c 4000