12th Ts grewal 2021-22 Question 16 to 20 Change in Profit Sharing Ratio

Double Entry Book Keeping Ts Grewal Volume-1 2021-22 Solutions 

Class 12 Commerce Accountancy

Chapter 4 - Change In Profit Sharing Ratio Among The Existing Partners

 

Page No 4.42:

Question 16:

Amar and Akhar are partners sharing profits in the ratio of 2 : 1. On 31st March, 2019, their Balance Sheet showed General Reserve of  ` 60,000. It was decided that in future they will share profits and losses in the ratio of 3 : 2. Pass necessary Journal entry in each of the following alternative cases:
(i) When General Reserve is not to be shown in the new Balance Sheet.
(ii) When General Reserve is to be shown in the new Balance Sheet.

Answer:

(i) If they do not want to show General Reserve in the new Balance Sheet

Journal

Date
 

Particulars

L.F.

Debit

Amount

( `)

Credit

Amount

( `)

2019
April 1


General Reserve A/c


Dr.

 


60,000

 

 

  To Amar’s Capital A/c

 

 

 

40,000

 

  To Akhar’s Capital A/c

 

 

 

20,000

 

(Being Adjustment of balance in General Reserve A/c in old ratio)

 

 

 

 


Working Notes:

WN1 Calculation of Share of General Reserve

Amar's share=60,000×23=40,000

Akhar's share=60,000×13=20,000
 

(ii) If they want to show General Reserve in the new Balance Sheet

Journal

Date
 

Particulars

L.F.

Debit

Amount

( `)

Credit

Amount

( `)

2019
April 1


Akhar’s Capital A/c


Dr.

 


4,000

 

 

  To Amar’s Capital A/c

 

 

 

4,000

 

(Being Adjustment of balance in General Reserve A/c in sacrificing/gaining ratio)

 

 

 

 

Working Notes:

WN1 Calculation of Gain/Sacrfice

Sacrificing Ratio=Old Ratio-New Ratio

Amar=23-35=115(sacrifice)

Akhar=13-25=-115(gain)

WN2 Calculation of Compensation by Akhar to Amar

Amount to be compensated=60,000×115=4,000
 



Page No 4.42:

Question 17: Mita, Gopal and Farhan were partners sharing profits and losses in the ratio 3:2:1. On 31st March, 2018. they decided to change the profit-sharing ratio to 5: 3:2. On this date, the Balance Sheet showed deferred advertisement expenditure `30,000 and contingency reserve 9,000.

Goodwill was valued at `4,80,000. Pass the necessary Journal entries for the above transactions in the books of the firm on its reconstitution.

(CBSE 2019)

Answer;

Journal

Particulars

L.F.

Debit

Amount

( `)

Credit

Amount

( `)

Mitha’s Capital A/c

Gopal’s Capital A/c

Farhan’s Capital A/c

   To Advertisement expenses a/c

(Being Advertisement expenses  A/c written off  in old ratio)

Dr.
Dr.
Dr.

 

 

 

15,000

10,000

5,000

 

 

 

 

9,000

 

 

 

 

 

 

16,000

 

 

 

30,000

 

 

 

 

 

4,500

3,000

1,500

 

 

 

16,000

 

Contingency reserve a/c

Dr. 

  To   Mitha’s Capital A/c

  To Gopal’s Capital A/c

  To  Farhan’s Capital A/c

(Being Contingency reserve A/c distributed in old ratio)

 

Farhan’s Capital A/c

  To Gopal’s Capital A/c

(Being capital of gainer and sacrificer’s capital a/c adjusted with their share of goodwill in gaining and sacrificing ratio)

Dr.

 

WN-1

 

Mita

Gopal

Farhan

Old ratio

3

:       2

:     1

New ratio

5

:       3

:      2

Mita = 3/6-5/10=30-30/60=0/60

Gopal =2/6-3/10=20-18/60=2/60(Scrifice)

Farhan=1/6-2/10=10-12/60=-2/60(Gain)

Goodwill of the firm=-4,80,000

Share of Gapal =4,80,000×2/60=`16,000

Share of Farhan =4,80,000×2/60=`16,000

WN-2

Adjustment of deferred advertisement expenditure and contingency reserve

Advertisement expenditure to be written off / debited (in old ratio 3;2;1)

Mita = 30,000×3/6 =15,000

Gopal = 30,000×2/6 =10,000

Farhan = 30,000×1/6 = 5,000

Contingency reserve to be Credited (in old ratio 3;2;1)

Mita = 9,000×3/6 =4,500

Gopal = 9,000×2/6 =3,000

Farhan = 9,000×1/6 = 1,500

 



Page No 4.42:

Question 18:

Bhavya and Sakshi are partners in a firm, sharing profits and losses in the ratio of 3 : 2. On 31st March, 2018 their Balance Sheet was as under:

BALANCE SHEET OF BHAVYA AND SAKSHI
as at 31st March, 2018

Liabilities

Amount
( `)

Assets

Amount
( `)

Sundry Creditors

 

13,800

Furniture

16,000

General Reserve

 

23,400

Land and Building

56,000

Investment Fluctuation Fund

 

20,000

Investments

30,000

Bhavya's Capital

 

50,000

Trade Receivables

18,500

Sakshi's Capital

40,000

Cash in Hand

26,700

 

1,47,200  

 

1,47,200 

 

 

 

 

The partners have decided to change their profit sharing ratio to 1 : 1 with immediate effect. For the purpose, they decided that:
(i) Investments to be valued at  ` 20,000.
(ii) Goodwill of the firm be valued at  ` 24,000.
(iii) General Reserve not to be distributed between the partners.
You are required to pass necessary Journal entries in the books of the firm. Show workings.

Answer:

In the books of Bhavya and Sakshi

Journal

Date

Particulars

 

L.F.

Debit
Amount

( `)

Credit
Amount

( `)

2018

 

 

 

 

 

March 31

Investment Fluctuation Fund A/c

Dr.

 

20,000

 

 

  To Investments A/c

 

 

 

10,000

 

  To Bhavya’s Capital A/c

 

 

 

6,000

 

  To Sakshi’s Capital A/c

 

 

 

4,000

 

(Being depreciation in the value of investment provided for and excess amount distributed)

 

 

 

 

 

 

 

 

 

 

March 31

Sakshi’s Capital A/c (24,000×1/10)

Dr.

 

2,400

 

 

To Bhavya’s Capital A/c (24,000×1/10)

 

 

 

2,400

 

(Being adjustment for goodwill due to change in profit-sharing ratio)

 

 

 

 

 

 

 

 

 

 

March 31

Sakshi’s Capital A/c (23,400×1/10)

Dr.

 

2,340

 

 

To Bhavya’s Capital A/c (23,400×1/10)

 

 

 

2,340

 

(Being adjustment for general reserve not distributed)

 

 

 

 

Working Notes:

Particulars

Bhavya

Sakshi

Old Ratio

3/5

2/5

New Ratio

1/2

1/2

Gain/Sacrifice

(3/5 – 1/2)= 1/10 (Sacrifice)

(2/5 – 1/2)= (-1/10) (Gain)

 



Page No 4.42:

Question 19:

X, Y and Z are sharing profits and losses in the ratio of 5 : 3 : 2. They decide to share future profits and losses in the ratio of 2 : 3 : 5 with effect from 1st April, 2019. They also decide to record the effect of the following accumulated profits, losses and reserves without affecting their book values by passing a single entry .

 

Book Values

( `)

 General Reserve

 6,000

 Profit and Loss A/c (Credit)

24,000

 Advertisement Suspense A/c

12,000

Pass an Adjustment Entry.

Answer:

Journal


Date
 

Particulars

L.F.

Debit

Amount

( `)

Credit

Amount

( `)

2019
April 1


Z’s Capital A/c


Dr.

 


5,400

 

 

To X’s Capital A/c

 

 

 

5,400

 

(Being Adjustment for General Reserve, Profit and Loss A/c and Advertisement Suspense account is made on change in profit sharing ratio)

 

 

 

 

 

 

 

 

Working Notes:

WN 1

Net amount to be adjusted = General reserve + Profit and loss A/C  (credit balance)- advertisement suspense a/c

=6000+24000-12000

=18,000

WN 2 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X, Y and Z) = 5 : 3 : 2

New Ratio (X, Y and Z) = 2 : 3 : 5

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

X’s share= 5/10-2/10= 3/10 (Sacrifice)

Y’s share= 3/10-3/1=NIL

Z’s share= 2/10-5/10= -3/10 (gain)

 



Page No 4.43:

Question 20:

Ashish, Aakash and Amit are partners sharing profits and losses equally. The Balance Sheet as at 31st March, 2019 was as follows:

 

Liabilities

Amount
( `)

Assets

Amount
( `)

Sundry Creditors

75,000

Cash in Hand

24,000

General Reserve

90,000

Cash at Bank

1,40,000

Capital A/cs:

 

Sundry Debtors

80,000

  Ashish

3,00,000

 

Stock

1,40,000

  Aakash

3,00,000

 

Land and Building

4,00,000

  Amit

2,75,000

8,75,000

Machinery

2,50,000

 

 

 

Advertisement Suspense

6,000

 

 

 

 

 

 

 

10,40,000

 

10,40,000

 

 

 

 

 



 The partners decided to share profits in the ratio of 2 : 2 : 1 w.e.f. 1st April, 2019. They also decided that:
(i) Value of stock to be reduced to  ` 1,25,000.
(ii) Value of machinery to be decreased by 10%.
(iii) Land and Building to be appreciated by  ` 62,000.
(iv) Provision for Doubtful Debts to be made @ 5% on Sundry Debtors.
(v) Aakash was to carry out reconstitution of the firm at a remuneration of  ` 10,000. 
Pass necessary Journal entries to give effect to the above.

Answer:

Journal

Date
 

Particulars

L.F.

Debit

Amount

( `)

Credit

Amount

( `)

2019

 

 

 

 

 

April 1

General Reserve A/c

Dr.

 

90,000

 

 

      To Ashish’s Capital A/c

 

 

 

30,000

 

      To Akash’s Capital A/c

 

 

 

30,000

 

      To Amit’s Capital A/c

 

 

 

30,000

 

(Being Reserve distributed)

 

 

 

 

 

 

 

 

 

 

April 1

Ashish’s Capital A/c

Dr.

 

2,000

 

 

Akash’s Capital A/c

Dr.

 

2,000

 

 

Amit’s Capital A/c

Dr.

 

2,000

 

 

     To Advertisement Suspense A/c

 

 

 

6,000

 

(Being Advertisement Suspense distributed)

 

 

 

 

 

 

 

 

 

 

April 1

Revaluation A/c

Dr.

 

54,000

 

 

     To Stock A/c

 

 

 

15,000

 

     To Machinery A/c

 

 

 

25,000

 

     To Provision for Doubtful Debts A/c

 

 

 

4,000

 

     To Akash’s Capital A/c (Remuneration)

 

 

 

10,000

 

(Being Assets revalued)

 

 

 

 

 

 

 

 

 

 

April 1

Land & Building A/c

Dr.

 

62,000

 

 

    To Revaluation A/c

 

 

 

62,000

 

(Being Assets revalued)

 

 

 

 

 

 

 

 

 

 

April 1

Revaluation A/c

Dr.

 

8,000

 

 

      To Ashish’s Capital A/c

 

 

 

2,666

 

      To Akash’s Capital A/c

 

 

 

2,666

 

      To Amit’s Capital A/c

 

 

 

2,667

 

(Being Profit made)