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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
(a) Murari and Vohra share profits in 3 : 2. Their Balance Sheet showed: General Reserve ₹30,000, Contingency Reserve ₹2,700, Profit & Loss A/c ₹18,000, Investment Fluctuation Reserve ₹9,000, Workmen Compensation Reserve ₹7,200, Employees’ Provident Fund ₹20,000, Investments (Market Value ₹1,14,000) ₹1,20,000, Advertisement Expenditure (deferred) ₹6,000. Krishna is admitted for a 1/5th share; the WCR claim is estimated at ₹900. Pass the entries to adjust accumulated profits and losses.
(b) A, B and C share profits in 6 : 3 : 1 and admit D w.e.f. 1st April, 2024, the new ratio being 3 : 3 : 3 : 1. Record the effect of the following, without altering book values, by a single adjustment entry through Current Accounts: General Reserve ₹1,50,000; Contingency Reserve ₹60,000; Profit & Loss A/c (Cr.) ₹90,000; Advertisement Suspense A/c (Dr.) ₹1,20,000.
Case (a):
JOURNAL
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| (i) | Investment Fluctuation Reserve A/c Dr. | 6,000 | ||
| To Investments A/c | 6,000 | |||
| (ii) | Workmen Compensation Reserve A/c Dr. | 900 | ||
| To Workmen Compensation Claim A/c | 900 | |||
| (iii) | General Reserve A/c Dr. 30,000; Contingency Reserve A/c Dr. 2,700; Profit & Loss A/c Dr. 18,000; IFR A/c Dr. 3,000; WCR A/c Dr. 6,300 | 60,000 | ||
| To Murari’s Capital A/c | 36,000 | |||
| To Vohra’s Capital A/c | 24,000 | |||
| (Balance of reserves distributed in the old ratio 3 : 2) | ||||
| (iv) | Murari’s Capital A/c Dr. 3,600; Vohra’s Capital A/c Dr. 2,400 | 6,000 | ||
| To Advertisement Expenditure A/c | 6,000 |
(Employees’ Provident Fund is an outside liability, so it is not distributed.)
Case (b): Net effect = ₹1,50,000 + ₹60,000 + ₹90,000 – ₹1,20,000 = ₹1,80,000. Sacrifice/(Gain): A 3/10 (Sac), B Nil, C 2/10 (Gain), D 1/10 (Gain).
JOURNAL
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| 2024 Apr 1 | C’s Current A/c Dr. (1,80,000 × 2/10) | 36,000 | ||
| D’s Current A/c Dr. (1,80,000 × 1/10) | 18,000 | |||
| To A’s Current A/c (1,80,000 × 3/10) | 54,000 | |||
| (Single adjustment entry for accumulated profits/losses in the gaining/sacrificing ratio) |
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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