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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

X's share=3,00,000×23=2,00,000Y's share=3,00,000×13=1,00,000


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