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#### Question 1:

A and B are sharing profits and losses equally. With effect from 1st April, 2018, they agree to share profits in the ratio of 4 : 3. Calculate individual partner's gain or sacrifice due to the change in ration.

Old Ratio (A and B) = 1 : 1

New Ratio (A and B) = 4 : 3

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

A’s Gain = 1/14

B’s Sacrifice = 1/14

#### Question 2:

X, Y and Z are sharing profits and losses in the ratio of 5 : 3 : 2. With effect from 1st April, 2018, they decide to share profits and losses in the ratio of 5 : 2 : 3. Calculate each Partner's gain or sacrifice due to the change in ratio.

Old Ratio (X, Y and Z) = 5 : 3 : 2

New Ratio (X, Y and Z) = 5 : 2 : 3

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

Z’s Gain = 1/10

Y’s Sacrifice = 1/10

#### Question 3:

X, Y and Z are sharing profits and losses in the ratio of 5 : 3 : 2. With effect from 1st April, 2018, they decide to share profits and losses equally. Calculate each partner's gain or sacrifice due to the change in ratio.

Old Ratio (X, Y and Z) = 5 : 3 : 2

New Ratio (X, Y and Z) = 1 : 1 : 1

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

Y’s Gain = 1/30

Z’s Gain = 4/30

X’s Sacrifice = 5/30

#### Question 4:

A, B and C are partners sharing profits and losses in the ratio of 5 : 4 : 1. Calculate new profit-sharing ratio, sacrificing ratio and gaining ratio in each of the following cases:
Case 1. C acquires 1/5th share from A.
Case 2. C acquires 1/5th share equally form A and B.
Case 3. A, B and C will share future profits and losses equally.
Case 4. C acquires 1/10th share of A and 1/2 share of B.

#### Question 5:

A, B and C shared profits and losses in the ratio of 3 : 2 : 1 respectively. With effect from 1st April, 2018, they agreed to share profits equally. The goodwill of the firm was valued at ₹18,000. Pass necessary Journal entries when: (a) Goodwill Account is not opened; and (b) Goodwill Account is opened.

​Cas (i) When Goodwill Account is not opened

 Journal Date ​2018 Particulars L.F. Debit Amount Rs Credit Amount Rs April 1 C’s Capital A/c Dr. 3,000 To A’s Capital A/c 3,000 (Adjustment of goodwill made on change in profit sharing ratio)

Working Notes:

Old Ratio (A, B and C) = 3 : 2 : 1

New Ratio (A, B and C) = 1 : 1 : 1

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

Goodwill of the firm = Rs 18,000

A will receive for goodwill =

C will give for goodwill =

​Cas (ii) When Goodwill Account is opened

 Journal Date 2018 Particulars L.F. Debit Amount Rs Credit Amount Rs Goodwill A/c Dr. 18,000 April 1 To A’s Capital A/c To B’s Capital A/c To C’s Capital A/c 9,000 6,000 3,000 April 1 (Being goodwill account opened) A's Capital A/c                                             Dr. B's Capital A/c                                             Dr. C's Capital A/c                                             Dr.           To Goodwill A/c (Being goodwill written off in 3:2:1) 9,000 6,000 3,000 18,000

#### Question 6:

X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. From 1st April, 2018, they decided to share profits and losses equally. The Partnership Deed provides that in the event of any change in the profit-sharing ratio, the goodwill should be valued at two years' purchase of the average profit of the preceding five years. The profits and losses of the preceding years ended 31st March, are:

 Year 2013-14 2014-15 2015-16 2016-17 2017-18 Profits (₹) 70,000 85,000 45,000 35,000 10,000 (Loss)
You are required to calculate goodwill and pass journal entry.

 Journal Date 2018 Particulars L.F. Debit Amount Rs Credit Amount Rs April 1 Y’s Capital A/c Dr. 3,000 Z’s Capital A/c Dr. 12,000 To X’s Capital A/c 15,000 (Amount of goodwill adjusted on change in profit sharing ratio)

Working Notes:

WN 1 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X, Y and Z) = 5 : 3 : 2

New Ratio (X, Y and Z) = 1 : 1 : 1

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

WN 2 Calculation of Goodwill

#### Question 7:

Mandeep, Vinod and Abbas are partners sharing profits and losses in the ratio of 3 : 2 : 1 . From 1st April, 2018, they decided to share profits and losses equally. The Partnership Deed provides that in the event of any change in the profit-sharing ratio, the goodwill shall be valued at three years' purchase of the average profit of last five years . The profits and losses of the past five years are:

Profit$—$Year ended  31st March, 2014$—$₹ 1,00,000;  2015$—$₹ 1,50,000;  2017$—$₹ 2,00,000;  2018$—$₹ 2,00,000;
Loss$—$Year ended  31st March, 2016$—$₹ 50,000.
Pass the journal entries showing the working.

 Journal Date 2018 Particulars L.F. Debit Amount (Rs) Credit Amount (Rs) April 1 Abbas’s Capital A/c Dr. 60,000 To Mandeep’s Capital A/c 60,000 (Adjustment entry made for change in ratio)

Working Notes:

WN1: Calculation of Sacrifice or Gain

WN2: Valuation of Goodwill

#### Question 8:

X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2 , decided to share future profits and losses equally with effect from 1st April, 2018. On that date , the goodwill appeared in the books at ₹ 12,000. But it was revalued at ₹ 30,000. Pass journal entries assuming that goodwill will not appear in the books of account .

 Journal Date 2018 Particulars L.F. Debit Amount Rs Credit Amount Rs (i) X’s Capital A/c Dr. 6,000 April  1 Y’s Capital A/c Dr. 3,600 Z’s Capital A/c Dr. 2,400 To Goodwill A/c 12,000 (Goodwill written off) (ii) Y’s Capital A/c Dr. 1,000 April 1 Z’s Capital A/c Dr. 4,000 To X’s Capital A/c 5,000 (Amount of goodwill adjusted on change in profit sharing ratio)

Working Notes:

WN 1 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X, Y and Z) = 5 : 3 : 2

New Ratio (X, Y and Z) = 1 : 1 : 1

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

WN 2 Writing off of Old Goodwill

#### Question 9:

A and B are partners in a firm sharing profits in the ratio of 2 : 1 . They decided with effect from 1st April, 2017, that they would share profits in the ratio of 3 : 2 . But, this decision was taken after the profit for the year 2017-18 amounting to ₹ 90,000 was distributed in the old ratio.
Value of firm's goodwill was estimated on the basis of aggregate of two years' profits preceding the date decision became effective .
The profits for 2015-16 and 2016-17 were ₹ 60,000 and ₹ 75,000 respectively. It was decided that Goodwill Account will not be opened in the books of the firm and necessary adjustment be made through Capital Accounts which, on 31st March, 2018 stood, at ₹ 1,50,000 for A and ₹ 90,000 for B.
Pass necessary journal entries and prepare Capital Accounts.

 Journal Date 2018 Particulars L.F. Debit Amount Rs Credit Amount Rs April 1 A’s Capital A/c Dr. 6,000 To B’s Capital A/c 6,000 (Adjustment of profit for 2016-17 on change in profit sharing ratio) April 1 B’s Capital A/c Dr. 9,000 To A’s Capital A/c 9,000 (Adjustment of goodwill made on change in profit sharing ratio)

 Partners’ Capital Accounts Dr. Cr. Particulars A B Particulars A B B's Capital A/c 6,000 – Balance b/d 1,50,000 90,000 (Adjustment of profit) A's Capital A/c – 6,000 A's Capital A/c – 9,000 (Adjustment Profit) (Adjustment of Goodwill) B's Capital A/c 9,000 – Balance c/d 1,53,000 87,000 (Adjustment of Goodwill) 1,59,000 96,000 1,59,000 96,000

Working Notes:

WN 1 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (A and B) = 2 : 1

New Ratio (A and B) = 3 : 2

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

WN 2 Adjustment of Profit for 2016-17

WN 3 Calculation of New Goodwill

WN 4

#### Question 10:

Jai and Raj are partners sharing profits in the ratio of 3 : 2 . With effect from 1st April, 2018, they decided to share profits equally. Goodwill appeared in the books at ₹ 25,000 . As on 1st April, 2018, it was valued at ₹ 1,00,000 . They decided to carry goodwill in the books of the firm.
Pass the journal entry giving effect to the above.

 Journal Date Particulars L.F. Debit Amount (Rs) Credit Amount (Rs) Raj’s Capital A/c Dr. 7,500 To Jai’s Capital A/c 7,500 (Adjustment for goodwill)

Working Notes:

Calculation of Gaining/Sacrificing Ratio

Sacrificing Ratio = Old Ratio ─ New Ratio

$\mathrm{Jai}=\frac{3}{5}-\frac{1}{2}=\frac{1}{10}\left(\mathrm{sacrifice}\right)\phantom{\rule{0ex}{0ex}}\mathrm{Raj}=\frac{2}{5}-\frac{1}{2}=\frac{1}{10}\left(\mathrm{gain}\right)$

Goodwill to be adjusted = 1,00,000 ─ 25,000 = 75,000

#### Question 11:

X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2 . With effect from 1st April, 2018, they decided to share future profits equally. On the date of change in the profit-sharing ratio, the Profit and Loss Account showed a credit balance of ₹ 1,50,000. Record the necessary journal entry for the distribution of the balance int he Profit and Loss Account immediately before the change in the profit-sharing ratio.

 Journal Date 2018 Particulars L.F. Debit Amount (Rs) Credit Amount (Rs) April 1 Profit & Loss A/c Dr. 1,50,000 To X’s Capital A/c 90,000 To Y’s Capital A/c 60,000 (Adjustment of balance in P&L A/c in old ratio)

Working Notes:

WN1 Calculation of Share of Profit and Loss A/c

#### Question 12:

and B are partners in a firm sharing profits  in the ratio of 4 : 1 . They decided to share future profits in the ratio of 3 : 2 w.e.f. 1st April,2018 . On that day, Profit and Loss Account showed a debit balance of ₹ 1,00,000.Pass journal entry to give effect to the above.

 Journal Date 2018 Particulars L.F. Debit Amount (Rs) Credit Amount (Rs) April 1 A’s Capital A/c Dr. 80,000 B’s Capital A/c Dr. 20,000 To Profit & Loss  A/c 1,00,000 (Profit & Loss  distributed)

#### Question 13:

X, Y and Z are 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 1st April, 2018. They also decided to record the effect of the following accumulated profits,losses and reserves without affecting their book values by passing a single entry .

 Book Value(₹) General Reserve 6,000 Profit and Loss A/c ( Credit) 24,000 Advertisement Suspense A/c 12,000

 Journal Date 2018 Particulars L.F. Debit Amount Rs Credit Amount Rs April 1 Z’s Capital A/c Dr. 5,400 To X’s Capital A/c 5,400 (Adjustment for General Reserve, Profit and Loss A/c and Advertisement Suspense account is made on change in profit sharing ratio)

Working Notes:

WN 1

WN 2 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X, Y and Z) = 5 : 3 : 2

New Ratio (X, Y and Z) = 2 : 3 : 5

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

#### Question 14:

A, B and C who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in  the ratio of 2 : 3 : 5 . Give the journal entry to distribute ' Workmen Compensation Reserve' of ₹ 1,20,000 at the time of change in profit-sharing ratio, when:
(i) no information is given        (ii) there is no claim against it.

(i) & (ii)

 Journal Date Particulars L.F. Debit Amount (Rs) Credit Amount (Rs) Workmen Compensation Reserve A/c Dr. 1,20,000 To A’s Capital A/c 60,000 To B’s Capital A/c 36,000 To C’s Capital A/c 24,000 (Workmen Compensation Reserve distributed)

Note:

In the both the cases, Workmen Compensation Reserve should be distributed in old ratio i.e., 5:3:2.

#### Question 15:

X, Y and Z who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in the ratio of 2 : 3 : 5. Give the journal entry to distribute 'Workmen Compensation Reserve' of ₹ 1,20,000 at the time of change in profit-sharing ratio, when there is a claim of ₹ 80,000 against it.

 Journal Date Particulars L.F. Debit Amount (Rs) Credit Amount (Rs) Workmen Compensation Reserve A/c Dr. 1,20,000 To X’s Capital A/c 20,000 To Y’s Capital A/c 12,000 To Z’s Capital A/c 8,000 To Workmen Compensation Claim A/c 80,000 (Adjustment of balance in Workmen Compensation Reserve A/c in old ratio)

Working Notes:

WN1 Calculation of Share of Workmen Compensation Reserve

#### Question 16:

X, Y and Z who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in  the ratio of 2 : 3 : 5 . with effect from 1st April, 2018. Workmen Compensation Reserve appears at ₹ 1,20,000 in the Balance Sheet as at 31st March, 2018 and Workmen Compensation Claim is estimated at  ₹ 1,50,000. Pass journal entries for the accounting treatment of Workmen Compensation Reserve.

 Journal Date Particulars L.F. Debit Amount (Rs) Credit Amount (Rs) Workmen Compensation Reserve A/c Dr. 1,20,000 Revaluation A/c Dr. 30,000 To Provision for Workmen Compensation Claim A/c 1,50,000 (Provision created and shortfall charged to Revaluation A/c) X’s Capital A/c Dr. 15,000 Y’s Capital A/c Dr. 9,000 Z’s Capital A/c Dr. 6,000 To Revaluation A/c 30,000 (Loss on revaluation transferred to Partners’ Capital A/c)

#### Question 17:

A, B and C who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in the ratio of 2 : 3 : 5. Give the journal entry to distribute 'Investments Fluctuation Reserve' of ₹ 20,000 at the time of change in profit-sharing ratio, when investment (market value ₹ 95,000) appears in the books at ₹ 1,00,000.

 Journal Date Particulars L.F. Debit Amount (Rs) Credit Amount (Rs) Investment Fluctuation Reserve A/c Dr. 5,000 To Investments A/c 5,000 (Adjustment for decrease in the value of investments) Investment Fluctuation Reserve A/c Dr. 15,000 To A’s Capital A/c 7,500 To B’s Capital A/c 4,500 To C’s Capital A/c 3,000 (Adjustment of balance in Investment Fluctuation Reserve A/c in old ratio)

Working Notes:
WN1 Calculation of Share of Investment Fluctuation Reserve

#### Question 18:

Nitin, Tarun and Amar are partners sharing profits equally and decide  to share profits in the ratio of 2 : 2 : 1 w.e.f . 1st April, 2018. The extract of their Balance Sheet as at 31st March, 2018 is as follows:

 Liabilities ₹ Assets ₹ Investments Fluctuation Reserve 60,000 Investments (At Cost) 4,00,000

Pass the journal entries in each of the following situations:
(i) When its Market Value is not given;
(ii) When its Market Value is given as ₹  4,00,000;
(iii) When its Market Value is given as ₹  4,24,000;
(iv) When its Market Value is given as ₹  3,70,000;
(v) When its Market Value is given as ₹  3,10,000.

 Journal Date 01.04.2018 Particulars L.F. Debit Amount (Rs) Credit Amount (Rs) (i) Investment Fluctuation Reserve A/c Dr. 60,000 To Nitin’s Capital A/c 20,000 To Tarun’s Capital A/c 20,000 To Amar’s Capital A/c 20,000 (Investment Fluctuation Reserve distributed) (ii) Investment Fluctuation Reserve A/c Dr. 60,000 To Nitin’s Capital A/c 20,000 To Tarun’s Capital A/c 20,000 To Amar’s Capital A/c 20,000 (Investment Fluctuation Reserve distributed) (iii) Investment Fluctuation Reserve A/c Dr. 60,000 To Nitin’s Capital A/c 20,000 To Tarun’s Capital A/c 20,000 To Amar’s Capital A/c 20,000 (Investment Fluctuation Reserve distributed) Investments A/c Dr. 24,000 To Revaluation A/c 24,000 (Investments revalued) Revaluation A/c Dr. 24,000 To Nitin’s Capital A/c 8,000 To Tarun’s Capital A/c 8,000 To Amar’s Capital A/c 8,000 (Revaluation profit transferred to Partners’ Capital A/c) (iv) Investment Fluctuation Reserve A/c Dr. 60,000 To Investment A/c 30,000 To Nitin’s Capital A/c 10,000 To Tarun’s Capital A/c 10,000 To Amar’s Capital A/c 10,000 (Investment Fluctuation Reserve distributed) (v) Investment Fluctuation Reserve A/c Dr. 60,000 Revaluation A/c Dr. 30,000 To Investment A/c 90,000 (Decrease in investments set off against IFR and balance debited to Revaluation A/c) Nitin’s Capital A/c Dr. 10,000 Tarun’s Capital A/c Dr. 10,000 Amar’s Capital A/c Dr. 10,000 To Revaluation A/c 30,000 (Loss on revaluation transferred to Partners’ Capital A/c)

#### Question 19:

X, Y are partners sharing profits in the ratio of 2 : 1 . On 31st March, 2018, their Balance Sheet showed General Reserve of ₹  60,000. It was decided that in future they will share profits and losses in the ratio of 3 : 2 . Pass necessary journal entry in each of the following alternative cases :
(i) If General Reserve is not to be shown in the new Balance Sheet .
(ii) If General Reserve is to be shown in the new Balance Sheet .

(i) If they do not want to show General Reserve in the new Balance Sheet

 Journal Date 2018 Particulars L.F. Debit Amount (Rs) Credit Amount (Rs) General Reserve A/c Dr. 60,000 April 1 To X’s Capital A/c 40,000 To Y’s Capital A/c 20,000 (Adjustment of balance in General Reserve A/c in old ratio)

Working Notes:

WN1 Calculation of Share of General Reserve

(ii) If they want to show General Reserve in the new Balance Sheet

 Journal Date 2018 Particulars L.F. Debit Amount (Rs) Credit Amount (Rs) April 1 Y’s Capital A/c Dr. 4,000 To X’s Capital A/c 4,000 (Adjustment of balance in General Reserve A/c in sacrificing/gaining ratio)

Working Notes:

WN1 Calculation of Gain/Sacrfice

WN2 Calculation of Compensation by Y to X

#### Question 20:

X and Y are in partnership sharing profits in the ratio of 2 : 3 . With effect from 1st April, 2018, they agreed to share profits in the ratio f 1 : 2 . For this purpose, goodwill of the firm is to be valued at two years' purchase of the average profit of last three years , which were ₹  1, 50,000; ₹  1,60,000 and ₹  2,00,000 respectively. The reserves appear in the books at ₹  1,10,000. Partners decide to continue showing Reserves in the books . You are required to give effect to the change by passing a single journal entry.

 Journal Date 2018 Particulars L.F. Debit Amount Rs Credit Amount Rs April 1 Y’s Capital A/c Dr. 30,000 To X’s Capital A/c 30,000 (Adjustment mode for goodwill and General Reserve)

Working Notes:

WN 1 Calculation of Goodwill

WN 2 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X and Y) = 2 : 3

New Ratio (X and Y) = 1 : 2

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

WN 4 Adjustment of General Reserve

WN 5 Net Adjustment of Goodwill and General Reserve

 Particulars X Y Adjustment of Goodwill 22,667 (Cr.) 22,667 (Dr.) Adjustment of General Reserve 7,333 (Cr.) 7,333 (Dr.) Net Amount 30,000 (Cr.) 30,000 (Dr.)

#### Question 21:

X, Y and Z share profits as 5 : 3 : 2 . They decide to share their future  profits as 4 : 3 : 3 with effect from 1st April, 2018. On this date the following revaluations have taken place :

 Book Value (₹ ) Revised Value (₹ ) Investments 22,000 25,000 Plant and Machinery 25,000 20,000 Land and Building 40,000 50,000 Outstanding Expenses 5,600 6,000 Sundry Debtors 60,000 50,000 Trade Creditors 70,000 60,000

Pass necessary adjustment entry to be made because of the above changes in the values of assets and liabilities . However, old values will continue in the books .

 Journal Date 2018 Particulars L.F. Debit Amount Rs Credit Amount Rs April 1 Z’s Capital A/c Dr. 760 To X’s Capital A/c 760 (Adjustment of revaluation profit made)

Working Notes:

WN 1 Calculation of Net Profit or Loss on Revaluation

 Particulars Amount (Rs) Increase in Investment 3,000 (Cr.) Decrease in Plant and Machinery (5,000) (Dr.) Increase in Land and Building 10,000 (Cr.) Increase in Outstanding Expenses (400) (Dr.) Decrease in Sunday Debtors (10,000) (Dr.) Decrease in Trade Creditors 10,000 (Cr.) Profit on Revaluation 7,600 (Cr.)

WN 2 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X, Y and Z) = 5 : 3 : 2

New Ratio (X, Y and Z) = 4 : 3 : 3

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

WN 3 Adjustment of Revaluation Profit

#### Question 22:

Ashish , Aakash and Amit are partners sharing profits and losses  equally. The Balance Sheet as at 31st March, 2018 was as follows:

 Liabilities ₹ Assets ₹ Sundry Creditors 75,000 Cash in Hand 24,000 General Reserve 90,000 Cash at Bank 1,40,000 Capital A/cs: Sundry Debtors 80,000 Ashish 3,00,000 Stock 1,40,000 Aakash 3,00,000 Land and Building 4,00,000 Amit 2,75,000 8,75,000 Machinery 2,50,000 Advertisement Suspense 6,000 10,40,000 10,40,000

The partners decided to share profits in the ratio of 2 ; 2 : 1 w.e.f . 1st April, 2018. They also decided that:
(i) Value of stock to be reduced to ₹ 1,25,000.
(ii) Value of machinery to be decreased by 10%.
(iii) Land and Building to be appreciated by ₹ 62,000.
(iv) Provision for  Doubtful Debts to be made @ 5% on Sundry Debtors.
(v) Aakash was to carry out reconstitution of the firm at a remuneration of ₹ 10,000.
Pass necessary journal entries to give effect to the above.

 Journal Date 2018 Particulars L.F. Debit Amount (Rs) Credit Amount (Rs) April 1 General Reserve A/c Dr. 90,000 To Ashish’s Capital A/c 30,000 To Akash’s Capital A/c 30,000 To Amit’s Capital A/c 30,000 (Reserve distributed) April 1 Ashish’s Capital A/c Dr. 2,000 Akash’s Capital A/c Dr. 2,000 Amit’s Capital A/c Dr. 2,000 To Advertisement Suspense A/c 6,000 (Advertisement Suspense distributed) April 1 Revaluation A/c Dr. 54,000 To Stock A/c 15,000 To Machinery A/c 25,000 To Provision for Doubtful Debts A/c 4,000 To Akash’s Capital A/c (Remuneration) 10,000 (Assets revalued) April 1 Land & Building A/c Dr. 62,000 To Revaluation A/c 62,000 (Assets revalued) April 1 Revaluation A/c Dr. 8,000 To Ashish’s Capital A/c 2,666 To Akash’s Capital A/c 2,666 To Amit’s Capital A/c 2,667 (Profit made)

#### Question 23:

A, B and C are partners sharing profits and losses in the ratio of 5 : 3 : 2 . Their Balance Sheet as at 31st March, 2017 stood as follows:

 Liabilities ₹ Assets ₹ Capital A/cs: Land and Building 3,50,000 A 2,50,000 Machinery 2,40,000 B 2,50,000 Computers 70,000 C 2,00,000 7,00,000 Investments(Market value ₹ 90,000) 1,00,000 General Reserve 60,000 Sundry Debtors 50,000 Investments Fluctuation Reserve 30,000 Cash in Hand 10,000 Sundry Creditors 90,000 Advertisement Suspense 5,000 8,80,000 8,80,000

They decided to share profits equally w.e.f. 1st April, 2017. They also agreed that:
(i) Value of Land and Building be decreased by 5% .
(ii) Value of Machinery be increased. by 5%.
(iii) A Provision for  Doubtful Debts be created @ 5% on Sundry Debtors.
(iv) A Motor Cycle valued at ₹ 20,000 was unrecorded and is now to be recorded  in the books.
(v) Out of Sundry Creditors, ₹ 10,000 is not payable.
(vi) Goodwill is to be valued at 2 years' purchase of last 3 years profits . Profits being for 2016-17$—$₹ 50,000 (Loss); 2015-16$—$₹2,50,000 and 2014-15$—$₹ 2,50,000.
(vii) C was to carry out the work for reconstituting the firm at a remuneration ( including expenses) of ₹ 5,000. Expenses came to ₹ 3,000.
Pass journal entries and prepare Revaluation Account.

 Journal Date Particulars L.F. Debit Amount (Rs) Credit Amount (Rs) General Reserve A/c Dr. 60,000 To A’s Capital A/c 30,000 To B’s Capital A/c 18,000 To C’s Capital A/c 12,000 (Reserve distributed) A’s Capital A/c Dr 2,500 B’s Capital A/c Dr. 1,500 C’s Capital A/c Dr. 1,000 To Advertisement Suspense A/c 5,000 (Advertisement Suspense distributed) Investment Fluctuation Reserve A/c Dr. 30,000 To Investment A/c 10,000 To A’s Capital A/c 10,000 To B’s Capital A/c 6,000 To C’s Capital A/c 4,000 (Investment Fluctuation Reserve distributed) Machinery A/c Dr. 12,000 Motor Cycle  A/c Dr. 20,000 Creditors  A/c Dr. 10,000 To Revaluation A/c 42,000 (Assets revalued) Revaluation A/c 25,000 To Land & Building A/c 17,500 To Provision for Doubtful Debts A/c 2,500 To Bank A/c (Remuneration) 5,000 (Assets revalued) Revaluation A/c 17,000 To A’s Capital A/c 8,500 To B’s Capital A/c 5,100 To C ’s Capital A/c 3,400 (Profit on revaluation transferred to Partners’ Capital A/c) B’s Capital A/c Dr. 10,000 C ’s Capital A/c Dr. 40,000 To A’s Capital A/c 50,000 (Goodwill adjusted)

 Revaluation A/c Dr. Cr. Particulars Amount Rs Particulars Amount Rs Land & Building A/c 17,500 Machinery A/c 12,000 Provision for Doubtful Debts A/c 2,500 Motor Cycle  A/c 20,000 Bank A/c (Remuneration) 5,000 Creditors  A/c 10,000 Profit transferred to: A 8,500 B 5,100 C 3,400 17,000 42,000 42,000

Working Notes:

WN1: Calculation of sacrifice or gain

WN2: Valuation of Goodwill

#### Question 24:

AB and C are partners sharing profits and losses in the ratio of 2 : 2 : 1 . They decided to share profit w.e.f. 1st April, 2018 in the ratio of 5 : 3 : 2 . They also decided not to change the values of assets and liabilities in the books of account . The book values and revised values of assets and liabilities as on the date of change were as follows:

 Book value (₹) Revised value (₹) Machinery 2,50,000 3,00,000 Computers 2,00,000 1,75,000 Sundry Creditors 90,000 75,000 Outstanding Expenses 15,000 25,000

 Journal Date 2018 Particulars L.F. Debit Amount (Rs) Credit Amount (Rs) April 1 A’s Capital A/c $\left(30,000×\frac{1}{10}=3,000\right)$ Dr. 3,000 To B’s Capital A/c 3,000 (Adjustment entry made for change in ratio)

Working Notes:

WN1: Calculation of Sacrifice or Gain

WN2: Calculation of Profit or Loss on Revaluation

 Revaluation A/c Dr. Cr. Particulars Amount Rs Particulars Amount Rs Computers A/c 25,000 Machinery A/c 50,000 Outstanding expenses A/c 10,000 Creditors A/c 15,000 Profit on Revaluation 30,000 65,000 65,000

#### Question 25:

X, Y and Z are partners sharing profits and losses in the ratio of 7 : 5 : 4 . Their Balance Sheet as at 31st March, 2018 stood as:

 Liabilities ₹ Assets ₹ Capital A/cs: Sundry Assets 7,00,000 X 2,10,000 Y 1,50,000 Z 1,20,000 4,80,000 General Reserve 65,000 Profit and Loss A/c 25,000 Creditors 1,30,000 7,00,000 7,00,000

Partners decided that with effect from 1st April, 2018 , they will share profits and losses in the ratio of 3 : 2 : 1  . For this purpose, goodwill of the firm was valued at ₹ 1,50,000. The partners neither want to record the goodwill nor want to distribute the General Reserve  and profits.

 Journal Date 2018 Particulars L.F. Debit Amount Rs Credit Amount Rs April 1 X’s Capital A/c Dr. 15,000 Y’s Capital A/c Dr. 5,000 To Z’s Capital A/c 20,000 (Adjustment made for Goodwill, General Reserve and Profit and Loss Account on change in profit sharing ratio)

 Balance Sheet as on 01st April, 2018 Liabilities Amount (Rs) Assets Amount (Rs) Capital A/c s: Sunday Assets 7,00,000 X 1,95,000 Y 1,45,000 Z 1,40,000 4,80,000 General Reserve 65,000 Profit and Loss A/c 25,000 Creditors 1,30,000 7,00,000 7,00,000

Working Notes:

WN 1 Calculation of Sacrificing (or Gaining) Ratio

Old Ratio (X, Y and Z) = 7 : 5 : 4

New Ratio (X, Y and Z) = 3 : 2 : 1

Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio

WN 2 Adjustment of General Reserve, Profit and Loss Account and Goodwill

Total Amount for Adjustment = General Reserve + Profit and Loss Account + Goodwill

= 65,000 + 25,000 + 1,50,000 = Rs 2,40,000

WN 3

 Partners’ Capital Accounts Dr. Cr. Particulars X Y Z Particulars X Y Z Z's Capital A/c 15,000 5,000 – Balance b/d 2,10,000 1,50,000 1,20,000 X's Capital A/c – – 15,000 Y's Capital A/c – – 5,000 Balance c/d 1,95,000 1,45,000 1,40,000 2,10,000 1,50,000 1,40,000 2,10,000 1,50,000 1,40,000

#### Question 26:

A, B and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance Sheet as on 31st March, 2015 was as follows:

 Liabilities Amount (₹) Assets Amount ​(₹) Creditors 50,000 Land 50,000 Bills Payable 20,000 Building 50,000 General Reserve 30,000 Plant 1,00,000 Capital A/cs: Stock 40,000 A 1,00,000 Debtors 30,000 B 50,000 Bank 5,000 C 25,000 1,75,000 2,75,000 2,75,000

​ From 1st April, 2015, A, B and C decided to share profits equally. For this it was agreed that:
(i) Goodwill of the firm will be valued at ₹ 1,50,000.
(ii) Land will be revalued at ₹ 80,000 and building be depreciated by 6%.
(iii) Creditors of ₹ 6,000 were not likely to be claimed and hence should be written off.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the reconstituted firm.

 Revaluation Account Dr. Cr. Particulars Amount (Rs) Particulars Amount (Rs) Building A/c 3,000 Land A/c 30,000 Revaluation Profit Creditors A/c 6,000 A 16,500 B 11,000 C 5,500 33,000 36,000 36,000

 Partners’ Capital Account Dr. Cr. Particulars A B C Particulars A B C A’s Capital A/c 25,000 Balance b/d 1,00,000 50,000 25,000 Balance c/d 1,56,500 71,000 10,500 R/v Profit 16,500 11,000 5,500 General Reserve 15,000 10,000 5,000 C’s Capital A/c 25,000 1,56,500 71,000 35,500 1,56,500 71,000 35,500

 Balance Sheet as on March 31, 2015 Liabilities Amount (Rs) Assets Amount (Rs) Capital A/c Land 50,000 A 1,56,500 Add: Increase 30,000 80,000 B 71,000 Building 50,000 C 10,500 2,38,000 Less: Dep. 3,000 47,000 Plant 1,00,000 Creditors 50,000 Bank 5,000 Less: Written-off 6,000 44,000 Stock 40,000 Bills Payable 20,000 Debtors 30,000 3,02,000 3,02,000

Working Notes

#### Question 27:

A and B are partners sharing profits in the ratio of 4 :3 . Their Balance Sheet as at 31st March, 2018 stood as:

 Liabilities ₹ Assets ₹ Sundry Creditors 28,000 Cash 20,000 Reserve 42,000 Sundry Debtors 1,20,000 Capital A/cs: Stock 1,40,000 A 2,40,000 Fixed Assets 4,20,000 B 1,20,000 3,60,000 4,30,000 4,30,000
They decided that with effect from 1st April, 2018, they will share profits and losses in the ratio of 2 : 1 . For this purpose they decided that:
(i) Fixed Assets are to be depreciated by 10%.
(ii) A Provision for Doubtful Debts of 6% be made on Sundry Debtors.
(iii) Stock be valued at ₹ 1,90,000.
(iv) An amount of ₹ 3,700 included in Creditors is not likely to be claimed .
Partners decided to record the revised values in the books . However, they do not want to disturb the Reserve . You are required to pass journal entries , prepare Capital Accounts of Partners and the revised Balance Sheet.