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
B is \
C is
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
Available profit =
Thus total compensation to A by B & C is
Regards,
Old profit sharing Ratio is 5:3:2
New profit sharing Ratio is 1:1:1
So, Sacrificing Ratio/(Gaining Ratio) of
A is
B is \
C is
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
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,