Question

Pronnil, Kamlesh and Ritika were partners sharing profits and losses in the ratio of 5 : 3 : 2. From 1st April, 2025 they decided to share future profits in the ratio of 2 : 3 : 5. Their Balance Sheet as at 31st March, 2025 was given. Adjustments: (i) Land and Building revalued at ₹6,62,000 (ii) Provision for doubtful debts @5% on debtors (iii) Goodwill valued at ₹1,80,000 (without opening goodwill account) (iv) Stock reduced to ₹2,00,000 Pass necessary journal entries.

Hint:

When goodwill is adjusted without opening goodwill account: Debit gaining partner and credit sacrificing partner in sacrificing ratio. Always calculate sacrificing ratio carefully.

Answer 1

Step 1: Sacrificing/Gaining Ratio Old ratio = 5 : 3 : 2 New ratio = 2 : 3 : 5 Convert to fractions: Pronnil: \( \frac{5}{10} - \frac{2}{10} = \frac{3}{10} \) sacrifice Kamlesh: \( \frac{3}{10} - \frac{3}{10} = 0 \) Ritika: \( \frac{2}{10} - \frac{5}{10} = -\frac{3}{10} \) gain Sacrificing : Gaining = 3 : 3 = 1 : 1 So Ritika compensates Pronnil. Step 2: Revaluation Profit/Loss Increase in Land \& Building = 6,62,000 – 5,60,000 = +1,02,000 Provision for doubtful debts = 5% of 1,20,000 = 6,000 (Loss) Decrease in stock = 2,40,000 – 2,00,000 = 40,000 (Loss) Net Gain = 1,02,000 – 6,000 – 40,000 = 56,000 Distributed in old ratio (5:3:2): Pronnil = 28,000 Kamlesh = 16,800 Ritika = 11,200 Step 3: Goodwill Adjustment Firm’s Goodwill = 1,80,000 Ritika compensates Pronnil in sacrificing ratio (1:1) Journal Entry: \[ \text{Ritika’s Capital A/c Dr. 54,000} \] \[ \quad \text{To Pronnil’s Capital A/c 54,000} \] Journal Entries 1. Revaluation adjustments 2. Transfer of revaluation profit 3. Goodwill adjustment entry