# A,B and C were partners sharing in the ratio 5:3:2.As on 1st Jan 2015 they decided to share the profits equally. on that date the goodwill of the firm was valued at Rs.40,000. There was a debit balance in the profit and loss account for Rs.15000 and the general reserve had a balance of Rs.30,000.Show the adjustments of these by means of a single entry.

Dear Student,

Old profit sharing Ratio is 5:3:2
New profit sharing Ratio is 1:1:1

So, Sacrificing Ratio/(Gaining Ratio) of

A is $\frac{5}{10}-\frac{1}{3}=\frac{5}{30}$
B is $\frac{3}{10}-\frac{1}{3}=-\frac{1}{30}$\
C is $\frac{2}{10}-\frac{1}{3}=-\frac{4}{30}$
Thus A sacrificed whereas B & C gains 1:4 on change of Profit sharing Ratio.

Now Goodwill of the firm as on that date was valued at Rs 40,000

Share of A's Goodwill to be compensated by B & C is $40,000×\frac{5}{10}=20,000$
Available profit =

Thus total compensation to A by B & C is

 Journal Date Particulars L.F. Debit Amount (Rs) Credit Amount (Rs) 1 Jan 2015 B's Capital A/c (1/5) Dr. 7,000 C's Capital A/c (4/5) 28,000 To A's Capital  A/c 35,000 (Being Adjustment entry passed on change of profit sharing Ratio)

Regards,

• 1
What are you looking for?