T.S. Grewal Class 12 Chapter 3 Q.22 - Change in Profit-Sharing Ratio Among the Existing Partners

Question 22

Mita, Gopal and Farhan were partners sharing profits and losses in the ratio of 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 on reconstitution. (CBSE 2019)

Solution

Sacrifice / (Gain): Mita = 3/6 – 5/10 = Nil; Gopal = 2/6 – 3/10 = 2/60 (Sacrifice); Farhan = 1/6 – 2/10 = –2/60 (Gain).

JOURNAL

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Mita’s Capital A/c    Dr.		15,000
	Gopal’s Capital A/c    Dr.		10,000
	Farhan’s Capital A/c    Dr.		5,000
	To Deferred Advertisement Expenditure A/c			30,000
	(Deferred advertisement expenditure written off in the old ratio 3 : 2 : 1)
	Contingency Reserve A/c    Dr.		9,000
	To Mita’s Capital A/c			4,500
	To Gopal’s Capital A/c			3,000
	To Farhan’s Capital A/c			1,500
	(Contingency Reserve distributed in the old ratio 3 : 2 : 1)
	Farhan’s Capital A/c    Dr. (4,80,000 × 2/60)		16,000
	To Gopal’s Capital A/c (4,80,000 × 2/60)			16,000
	(Adjustment of goodwill on change in profit-sharing ratio)