# 12th | Ts grewal 2022-2023 Question 11 to 15 | Change in Profit Sharing Ratio

#### Question 11:

A, B and C who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in the ratio of 2 : 3 : 5. Give the Journal entry to distribute 'Workmen Compensation Reserve' of  ` 1,20,000 at the time of change in profit-sharing ratio, when:
(i) no information is given; (ii) there is no claim against it.

(i) & (ii)

 Journal Date Particulars L.F. Debit  ( `) Credit  ( `) Workmen Compensation Reserve A/c Dr. 1,20,000 To A’s Capital A/c 60,000 To B’s Capital A/c 36,000 To C’s Capital A/c 24,000 (Being Workmen Compensation Reserve distributed)

Note:

In the both the cases, Workmen Compensation Reserve should be distributed in old ratio i.e., 5:3:2.

#### Question 12:

X, Y and Z who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in the ratio of 2 : 3 : 5. Give the journal entry to distribute 'Workmen Compensation Reserve' of  ` 1,20,000 at the time of change in profit-sharing ratio, when there is a claim of  ` 80,000 against it.

 Journal Date Particulars L.F. Debit  ( `) Credit  ( `) Workmen Compensation Reserve A/c Dr. 1,20,000 To X’s Capital A/c 20,000 To Y’s Capital A/c 12,000 To Z’s Capital A/c 8,000 To Workmen Compensation Claim A/c 80,000 (Being Adjustment of balance in Workmen Compensation Reserve A/c in old ratio)

Working Notes:

WN1 Calculation of Share of Workmen Compensation Reserve
X's share=40,000×5/10=20,000

Y's share=40,000×3/10=12,000

Z's share=40,000×2/10=8,000

#### Question 13:

Ashok, Bhim and Chetan who are sharing profits in the ratio of 5 : 3 : 2, decide to share profits in the ratio of 2 : 3 : 5 with effect from 1st April, 2022. Workmen Compensation Reserve appears at  ` 1,20,000 in the Balance Sheet as at 31st March, 2022 and Workmen Compensation Claim is estimated at  ` 1,50,000. Pass Journal entries for the accounting treatment of Workmen Compensation Reserve.

 Journal Date Particulars L.F. Debit  ( `) Credit  ( `) 2022 April 1 Workmen Compensation Reserve A/c Dr. 1,20,000 Revaluation A/c Dr. 30,000 To Provision for Workmen Compensation Claim A/c 1,50,000 (Being Provision created and shortfall charged to Revaluation A/c) Ashok’s Capital A/c Dr. 15,000 Bhim’s Capital A/c Dr. 9,000 Chetan’s Capital A/c Dr. 6,000 To Revaluation A/c 30,000 (Being Loss on revaluation transferred to Partners’ Capital A/c)

#### Question 14:

A, B and C who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in the ratio of 2 : 3 : 5. Give the journal entry to distribute 'Investments Fluctuation Reserve' of  ` 20,000 at the time of change in profit-sharing ratio, when investment (market value  ` 95,000) appears in the books at  ` 1,00,000.

 Journal Date Particulars L.F. Debit  ( `) Credit  ( `) Investment Fluctuation Reserve A/c Dr. 5,000 To Investments A/c 5,000 (Being Adjustment for decrease in the value of investments) Investment Fluctuation Reserve A/c Dr. 15,000 To A’s Capital A/c 7,500 To B’s Capital A/c 4,500 To C’s Capital A/c 3,000 (Being Adjustment of balance in Investment Fluctuation Reserve A/c in old ratio)

Working Notes:
WN1 Calculation of Share of Investment Fluctuation Reserve
A's share=15,000×5/10=7,500

B's share=15,000×3/10=4,500

C's share=15,000×2/10=3,000

#### Question 15:

Nitin, Tarun and Amar are partners sharing profits equally and decide to share profits in the ratio of 2 : 2 : 1 w.e.f. 1st April, 2022. The extract of their Balance Sheet as at 31st March, 2022 is as follows:

 Liabilities ` Assets ` Investments Fluctuation Reserve 60,000 Investments (At Cost) 4,00,000

Pass the Journal entries in each of the following situations:
(i) When its Market Value is not given;
(ii) When its Market Value is
` 4,00,000;
(iii) When its Market Value is
` 4,24,000;
(iv) When its Market Value is
` 3,70,000;
(v) When its Market Value is
` 3,10,000.

 Journal Date Particulars L.F. Debit  ( `) Credit  ( `) 2022 April 1 Investment Fluctuation Reserve A/c Dr. 60,000 To Nitin’s Capital A/c 20,000 To Tarun’s Capital A/c 20,000 To Amar’s Capital A/c 20,000 (Being Investment Fluctuation Reserve distributed) Investment Fluctuation Reserve A/c Dr. 60,000 To Nitin’s Capital A/c 20,000 To Tarun’s Capital A/c 20,000 To Amar’s Capital A/c 20,000 (Being Investment Fluctuation Reserve distributed) Investment Fluctuation Reserve A/c Dr. 60,000 To Nitin’s Capital A/c 20,000 To Tarun’s Capital A/c 20,000 To Amar’s Capital A/c 20,000 (Being Investment Fluctuation Reserve distributed) Investments A/c Dr. 24,000 To Revaluation A/c 24,000 (Being Investments revalued) Revaluation A/c Dr. 24,000 To Nitin’s Capital A/c 8,000 To Tarun’s Capital A/c 8,000 To Amar’s Capital A/c 8,000 (Being Revaluation profit transferred to Partners’ Capital A/c) Investment Fluctuation Reserve A/c Dr. 60,000 To Investment A/c 30,000 To Nitin’s Capital A/c 10,000 To Tarun’s Capital A/c 10,000 To Amar’s Capital A/c 10,000 (Being Investment Fluctuation Reserve distributed) Investment Fluctuation Reserve A/c Dr. 60,000 Revaluation A/c Dr. 30,000 To Investment A/c 90,000 (Decrease in investments set off against IFR and balance debited to Revaluation A/c) Nitin’s Capital A/c Dr. 10,000 Tarun’s Capital A/c Dr. 10,000 Amar’s Capital A/c Dr. 10,000 To Revaluation A/c 30,000 (Being Loss on revaluation transferred to Partners’ Capital A/c)

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