Question

Reeha, Meenu, and Sara were partners in a partnership firm sharing profits and losses in the ratio of 2:2:1. With effect from 1\textsuperscript{st April, 2023, they agreed to share profits and losses equally. On that date, there was a General Reserve of \rupee50,000 in the books of the firm. It was agreed that:} Goodwill of the firm be valued at \rupee3,00,000. Profit on revaluation of assets and re-assessment of liabilities amounted to \rupee30,000. Pass necessary journal entries for the above transactions in the books of the firm.

Hint:

For profit-sharing adjustments, ensure that goodwill and reserves are distributed in the old ratio and profits are transferred based on revaluation gains or losses.

Answer 1

1. The General Reserve of \rupee50,000 is distributed among the partners in their old profit-sharing ratio (2:2:1). 2. The profit on revaluation of \rupee30,000 is also distributed in the old ratio (2:2:1). 3. The goodwill of \rupee3,00,000 is adjusted among partners in their old ratio to reflect the change in the profit-sharing ratio.