Question

Mahesh, Ramesh and Naresh were partners in a firm sharing profits in the ratio of 5 : 3 : 2. From 1^st April 2023, they decided to share profits equally. On that date, there was a balance of ₹ 3,60,000 in General Reserve and a debit balance of ₹ 1,80,000 in the Profit and Loss Account. Pass single adjustment Journal entry for the above on account of change in the profit sharing ratio.

Answer 1

Mahesh's old share = `5/10`, new share = `1/3`

Mahesh's gain/sacrifice = `5/10 - 1/3`

= `(15 - 10)/30`

= `5/30` (Sacrifice)

Ramesh's old share = `3/10`, new share = `1/3`

Ramesh's gain/sacrifice = `3/10 - 1/3`

= `(9 - 10)/30`

= `(-1)/30` (Gain)

Naresh's old share = `2/10`, new share = `1/3`

Naresh's gain/sacrifice = `2/10 - 1/3`

= `(6 - 10)/30`

= `(-4)/30` (Gain)

	Amount (₹)
Credit balance of General Reserve	3,60,000
Debit balance of P and L	(−) 1,80,000
Actual Adjustment (Cr.)	1,80,000

Mahesh's account to be credited with = ₹ `1,80,000 xx 5/30`

= ₹ 30,000

Ramesh's account to be debited with = ₹ `1,80,000 xx 1/30`

= ₹ 6,000

Naresh's account to be debited with = ₹ `1,80,000 xx 4/30`

= ₹ 24,000

Particulars	Amt	Amt
Ramesh's Capital A/c   ...Dr.	6,000
Naresh's Capital A/c   ...Dr.	24,000
To Mahesh's Capital A/c		30,000
(Being adjustment entry passed)