# 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.

(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)

 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

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.

 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

 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.

 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)

Click on Below link for more questions Of Volume-1 of 12th

## Chapter-3: Change in Profit Sharing Ratio| 2021-2022

From Question No. 1 to 5

From Question No. 6 to 10

From Question No. 11 to 15

From Question No. 16 to 20

From Question No. 21 to 25

From Question No. 26 and 27