Question

X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2 . With effect from 1st April, 2018, they decided to share future profits equally. On the date of change in the profit-sharing ratio, the Profit and Loss Account showed a credit balance of ₹ 1,50,000. Record the necessary journal entry for the distribution of the balance int he Profit and Loss Account immediately before the change in the profit-sharing ratio.

Answer 1

Journal
Date 2018	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
April 1	Profit & Loss A/c	Dr.		1,50,000
	To X’s Capital A/c				90,000
	To Y’s Capital A/c				60,000
	(Adjustment of balance in P&L A/c in old ratio)

Working Notes:

WN1 Calculation of Share of Profit and Loss A/c

$$\begin{gathered} \mathrm{X}\text{'}\mathrm{s}\mathrm{share}=1,50,000\times \frac{3}{5}=90,000 \\ \mathrm{Y}\text{'}\mathrm{s}\mathrm{share}=1,50,000\times \frac{2}{5}=60,000 \end{gathered}$$