Question

Mehak, Ayush and Anshu were partners in a firm sharing profits and losses in the ratio of 5:3:2. With effect from 1st April, 2023, they agreed to share profits and losses in the ratio of 4:3:3. On that date, there was a General Reserve of \rupee 80,000 in the books of the firm. It was agreed that: Goodwill of the firm be valued at \rupee 3,00,000. Loss on revaluation of assets and re-assessment of liabilities amounted to \rupee 50,000. Pass necessary journal entries for the above transactions in the books of the firm.

Hint:

Always use the old profit-sharing ratio to allocate reserves and revaluation losses, and adjust goodwill based on the gaining ratio.

Answer 1

Journal Entries: \begin{center} \begin{tabular}{|l|l|l|l|} Date & Particulars & Debit (\rupee) & Credit (\rupee)
1st April, 2023 & General Reserve A/c & 80,000 & --
& To Mehak’s Capital A/c & -- & 40,000
& To Ayush’s Capital A/c & -- & 24,000
& To Anshu’s Capital A/c & -- & 16,000
& \textit{(General Reserve distributed in old ratio of 5:3:2)} & &
1st April, 2023 & Mehak’s Capital A/c & 15,000 & --
& Ayush’s Capital A/c & -- & 15,000
& \textit{(Adjustment for goodwill in gaining ratio 4:3:3)} & &
1st April, 2023 & Revaluation Loss A/c & 50,000 & --
& To Mehak’s Capital A/c & -- & 25,000
& To Ayush’s Capital A/c & -- & 15,000
& To Anshu’s Capital A/c & -- & 10,000
& \textit{(Revaluation loss shared in old ratio 5:3:2)} & &
\end{tabular} \end{center}