Question 16 Chapter 4 of +2 Part-1 – USHA Publication 12 Class Part – 1

Question 16 Chapter 4 of +2- Part-

Question 16 Chapter 4 of +2-Part-1

16. (Comprehensive Illustration) X and Y are in partnership, sharing profits in 2:3 ratio. With effect from 1st April 2019, they agreed to share profits in the ratio of 1:2. For this purpose, the goodwill of the firm is to be valued at two years purchase of the average profits of the last three years, which were Rs.75,000, Rs.80,000 and Rs.1,00,000 respectively. The reserve appears in the books at Rs.55,000. Partners neither want to show the goodwill in the books nor want to distribute the reserve. You are required to give effect to the change by passing a single journal entry. 

 

The solution of Question 16 Chapter 4 of +2 Part-1: – 

 

In the Books of A, B and C
Date Particulars
L.F. Debit Credit
2019          
April 1 Y’s Capital A/c Dr.   15,000  
  To X’s Capital A/c       15,000
  (Being capitals adjusted on account of change in profit ratio)        
         

 

Working Notes: –

 

Old Ratio = 2 : 3
New Ratio = 2 : 2
Calculate the Sacrificing or Gaining Ratio of Partners
Sacrificing or Gaining Ratio = Old ratio – New ratio

 

X’s Share Sacrificing/Gaining = 2 1
5 3
  = 6- 5
  15
  = 1 (Sacrificing)
  15

 

 

Y’s Share Sacrificing/Gaining = 3 2
5 3
  = 9 – 10
  15
  = -1 (Gain)
  15

 

Calculation of net adjustment in the partner’s capital accounts:
Particulars
A B
     
On account of goodwill (Rs.1,70,000*1/15) (Cr.)11,333 (Dr.)11,333
On account of Reserve (Rs.55,000*1/15) (Cr.) 3,667 (Dr.) 3,667
Adjustment (Cr.)15,000 (Dr.)15,000

 

 

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Also, Check out the solved question of previous Chapters: –

Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution

Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution

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2 Book 1 min - Question 16 Chapter 4 of +2 Part-1 - USHA Publication  12 Class Part - 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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