Pawan, Iqbal and Rick are partners sharing profits in the ratio of 2 : 2 : 1. From 1st April, 2016, they decided to share profits in the ratio of 1 : 2 : 2. On that date, following balances appeared in the balance sheet. Profit and loss (debit balance Rs 40,000); general reserve Rs 1,40,000; deferred revenue expenditure Rs 20,000.

Pass adjusting journal entry when these reserves will appear in the books of the re-constituted firm.

Dear Student,
Particulars L.F. Debit Amount
Credit Amount
Rick’ s Capital A/c Dr.   16,000  
To Pawan’s Capital A/c     16,000
(Adjustment entry made)      

Calculation of sacrifice or gainPawan=25-15=15sacrificeIqbaal=25-25=0Rick=15-25=-15gainTotal amount to be adjusted=General reserve-P/LDr.-Deferred revenue expenditure                                         =1,40,000-40,000-20,000=Rs. 80,000Pawan and Rick's share=80,000×15=Rs. 16,000


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