Question

The firm of Amish, Nitish and Misha, who have been sharing profits in the ratio of 2 : 2 : 1, have existed for some years. Misha wanted that she should get equal share in the profits with Amish and Nitish and she further wished that the change in the profit sharing ratio should come into effect retrospectively for the last three years. Amish and Nitish had agreement for this.
The profits for the last three years were: 2021–22 ₹ 1,15,000; 2022–23 ₹ 1,24,000; 2023–24 ₹ 2,11,000
Show adjustment of profits by means of a single adjustment journal entry. Show your working clearly.

Hint:

For retrospective changes, use total profit and compute shares in old vs new ratio to find gain or sacrifice.

Answer 1

Step 1: Total profit over 3 years =
₹ 1,15,000 + ₹ 1,24,000 + ₹ 2,11,000 = ₹ 4,50,000 Step 2: Old Ratio = 2:2:1 and New Ratio = 1:1:1 Distribute old: \[ \text{Amish} = \frac{2}{5} \times 4,50,000 = ₹ 1,80,000
\text{Nitish} = ₹ 1,80,000
\text{Misha} = ₹ 90,000 \] Distribute new: \[ \text{Each} = \frac{1}{3} \times 4,50,000 = ₹ 1,50,000 \] Now adjust: \[ \text{Amish: Lose ₹ 30,000,\ Nitish: Lose ₹ 30,000,\ Misha: Gain ₹ 60,000} \] Journal Entry: \[ \text{Amish’s Capital A/c Dr. ₹ 30,000}
\text{Nitish’s Capital A/c Dr. ₹ 30,000}
\text{To Misha’s Capital A/c ₹ 60,000} \]