Question

​X, Y and Z are partners sharing profits and losses in the ratio of 7 : 5 : 4 . Their Balance Sheet as at 31st March, 2018 stood as:

Liabilities		₹	Assets	₹
Capital A/cs:			Sundry Assets	7,00,000
X	2,10,000
Y	1,50,000
Z	1,20,000	4,80,000
General Reserve		65,000
Profit and Loss A/c		25,000
Creditors		1,30,000
		7,00,000		7,00,000

Partners decided that with effect from 1st April, 2018 , they will share profits and losses in the ratio of 3 : 2 : 1 . For this purpose, goodwill of the firm was valued at ₹ 1,50,000. The partners neither want to record the goodwill nor want to distribute the General Reserve and profits.

Answer 1

Journal
Date 2018	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
April 1	X’s Capital A/c	Dr.		15,000
	Y’s Capital A/c	Dr.		5,000
	To Z’s Capital A/c				20,000
	(Adjustment made for Goodwill, General Reserve and Profit and Loss Account on change in profit sharing ratio)

Balance Sheet as on 01st April, 2018
Liabilities		Amount (Rs)	Assets	Amount (Rs)
Capital A/c s:			Sunday Assets	7,00,000
X	1,95,000
Y	1,45,000
Z	1,40,000	4,80,000
General Reserve		65,000
Profit and Loss A/c		25,000
Creditors		1,30,000
		7,00,000		7,00,000

Working Notes:

WN 1 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X, Y and Z) = 7 : 5 : 4

New Ratio (X, Y and Z) = 3 : 2 : 1

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

WN 2 Adjustment of General Reserve, Profit and Loss Account and Goodwill

Total Amount for Adjustment = General Reserve + Profit and Loss Account + Goodwill

= 65,000 + 25,000 + 1,50,000 = Rs 2,40,000

WN 3

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Z's Capital A/c	15,000	5,000	–	Balance b/d	2,10,000	1,50,000	1,20,000
				X's Capital A/c	–	–	15,000
				Y's Capital A/c	–	–	5,000
Balance c/d	1,95,000	1,45,000	1,40,000
	2,10,000	1,50,000	1,40,000		2,10,000	1,50,000	1,40,000