Question

Sita, Gita and Rita are partners sharing profits in the ratio of 4 : 3 : 2. From April 1, 2024, they decided to share the profit equally. On that date their books showed the following items:
General Reserve ₹1,80,000
Workmen Compensation Reserve ₹2,25,000
Profit & Loss Account (Dr.) ₹4,50,000
Record the necessary Journal Entries.

Hint:

On change in profit-sharing ratio, accumulated profits and losses are distributed in the old ratio before the change.

Answer 1

Old Profit Sharing Ratio = 4 : 3 : 2 
(i) Distribution of General Reserve \[ \text{Sita} = \frac{4}{9} \times 1,80,000 = 80,000 \] \[ \text{Gita} = \frac{3}{9} \times 1,80,000 = 60,000 \] \[ \text{Rita} = \frac{2}{9} \times 1,80,000 = 40,000 \] Journal Entry General Reserve A/c Dr. ₹1,80,000
To Sita’s Capital A/c ₹80,000
To Gita’s Capital A/c ₹60,000
To Rita’s Capital A/c ₹40,000 (ii) Distribution of Workmen Compensation Reserve \[ \text{Sita} = \frac{4}{9} \times 2,25,000 = 1,00,000 \] \[ \text{Gita} = \frac{3}{9} \times 2,25,000 = 75,000 \] \[ \text{Rita} = \frac{2}{9} \times 2,25,000 = 50,000 \] Journal Entry Workmen Compensation Reserve A/c Dr. ₹2,25,000
To Sita’s Capital A/c ₹1,00,000
To Gita’s Capital A/c ₹75,000
To Rita’s Capital A/c ₹50,000 (iii) Distribution of Profit & Loss Account (Debit Balance) \[ \text{Sita} = \frac{4}{9} \times 4,50,000 = 2,00,000 \] \[ \text{Gita} = \frac{3}{9} \times 4,50,000 = 1,50,000 \] \[ \text{Rita} = \frac{2}{9} \times 4,50,000 = 1,00,000 \] Journal Entry Sita’s Capital A/c Dr. ₹2,00,000
Gita’s Capital A/c Dr. ₹1,50,000
Rita’s Capital A/c Dr. ₹1,00,000
To Profit & Loss A/c ₹4,50,000