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Question

# X and Y were partners in a firm sharing profits and losses in the ratio of 2 : 1. Z was admitted for 1/3rd share in the profits. On the date of Z's admission, the Balance Sheet of X and Y showed General Reserve of ₹ 2,50,000 and a credit balance of ₹ 50,000 in Profit and Loss Account. Pass necessary Journal entries on the treatment of these items on Z's admission.

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Solution

## Journal Date Particulars L.F. Debit Amount (Rs) Credit Amount (Rs) General Reserve A/c Dr. 2,50,000 Profit and Loss A/c Dr. 50,000 To X’s Capital A/c 2,00,000 To Y’s Capital A/c 1,00,000 (Adjustment of balance in General Reserve A/c and P&L A/c in old ratio) Working Notes: WN1 Calculation of Share of General Reserve & P&L A/c $\mathrm{X}\text{'}\mathrm{s}\mathrm{share}=3,00,000×\frac{2}{3}=2,00,000\phantom{\rule{0ex}{0ex}}\mathrm{Y}\text{'}\mathrm{s}\mathrm{share}=3,00,000×\frac{1}{3}=1,00,000$

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