T.S. Grewal Class 12 Chapter 3 Q.7 - Change in Profit-Sharing Ratio Among the Existing Partners

Question 7

X, Y and Z are partners sharing profits equally. They decided that in future Z will get a 1/5th share in profits. On the day of the change, the firm’s goodwill is valued at ₹30,000. Give the Journal entry arising on account of the change in profit-sharing ratio.

Solution

Old Ratio = 1 : 1 : 1. New: Z = 1/5, so X and Y share the remaining 4/5 equally = 2/5 each → New Ratio = 2 : 2 : 1.

Sacrifice / (Gain): X = 1/3 – 2/5 = –1/15 (Gain); Y = 1/3 – 2/5 = –1/15 (Gain); Z = 1/3 – 1/5 = 2/15 (Sacrifice).

JOURNAL

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	X’s Capital A/c    Dr. (30,000 × 1/15)		2,000
	Y’s Capital A/c    Dr. (30,000 × 1/15)		2,000
	To Z’s Capital A/c (30,000 × 2/15)			4,000
	(Gaining partners X and Y compensating the sacrificing partner Z for goodwill)

Note: Goodwill is taken at ₹30,000 (as given in the textbook); Z’s sacrifice of 2/15 × ₹30,000 = ₹4,000 is borne equally by X and Y.