X, Y and Z were sharing profits and losses in the ratio of 5:3:2. They decided to share future profits and losses in the ratio of 2:3:5 with effect from 1.4.2007. They decided to record the effect of the following, without affecting their book values:-
(i) Profit and Loss Account Rs. 24,000
(ii) Advertisement Suspense Account Rs. 12,000
Pass the necessary adjusting entry.
Urgent plz...:)
Old Ratio=5:3:2
New Ratio=2:3:5
Sacrificing Ratio
X=5/10-2/10=3/10(sacrificing)
Y=3/10-3/10=0
Z=2/10-5/10=-3/10(gaining)
Profit and Loss a/c 24000
Advertisement exp -12000
_______
12000
_______
The gaining partner(Z) will give his share of gain to the sacrificing partner(X) due to the change in the profit sharing ratio.
Z will give=3/10*12000
=3600
Adjustment Entry:
Z's Capital A/c Dr 3600
To X' Capital A/c 3600