01 Change in PSR Marathon

Change in Profit Sharing Ratio
Topics Sub Topic
The Sacrificing Ratio Sacrificing and Gaining Ratio
The Accounting of Goodwill Existing and New Goodwill
The Accumulated Profits and Losses WCR, IFR, DRE, Reserves, Losses
The Revaluation of Assets and Reassessment of Liabilities Revaluation Account
The Balance Sheet of The Reconstituted Firm Adjustment of Capital Accounts

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Change in Profit Sharing Ratio
Topics Sub Topic
The Sacrificing Ratio Sacrificing and Gaining Ratio
The Accounting of Goodwill Existing and New Goodwill
The Accumulated Profits and Losses WCR, IFR, DRE, Reserves, Losses
The Revaluation of Assets and Reassessment of Liabilities Revaluation Account
The Balance Sheet of The Reconstituted Firm Adjustment of Capital Accounts

Reconstitution of
Partnership Firm
Meaning
Partnership is the result of an agreement between persons for

sharing the profits of a business.
Any change in the partnership agreement brings to an end the

existing agreement and a new agreement comes into force.
The change in the agreement results in changes in the

relationship among the partners.
In such a case, although the firm continues, it amounts to the

reconstitution of the partnership firm.
A firm is reconstituted in the event of:
(i) Change in the profit-sharing ratio among the existing partners.
(ii) Admission of a partner or partners.
(iii) Retirement of a partner.
(iv) Death of a partner.
(v) Amalgamation of two or more partnership firms.

Change in
Profit Sharing
Ratio Among
Partners
😁😁😁
Meaning
The existing partners may agree to share profits and losses in a ratio that is
different from the earlier agreed profit-sharing ratio.
The change is necessitated due to the change in capital contribution or in active

participation in management.
Change in the profit-sharing ratio among the existing partners results in

reconstitution of the firm.
Change in Profit-sharing Ratio leads to dissolution of partnership and not of the

firm because the existing partnership agreement ends and the new agreement
comes into effect.
The issues that need to be addressed at the time of change in the profit-sharing ratio are:
1. Determination of Sacrificing Ratio and Gaining Ratio
2. Accounting of Goodwill
3. Accounting of Reserves, Accumulated Profits and Losses
4. Revaluation of Assets and Reassessment of Liabilities
5. Balance Sheet
Change in PSR –
The Sacrificing
Ratio
😁😁😁
Sacrificing Ratio
Whenever there is a change in the profit sharing ratio, one or more of the existing
partners have to surrender some of their old share in favour of one or more of other
partners. The ratio of surrender of profit sharing ratio is called sacrificing ratio. It is
calculated as follows:
Note: The purpose of calculating sacrificing ratio is to determine the amount of compensation to be
paid by the gaining partner (i.e., the partner whose share has increased as a result of change) to the
sacrificing partner (i.e., the partner whose share has decreased as a result of change). Such
compensation is usually paid on the basis of proportionate amount of goodwill.
Profits:
Ram Shyam
Mohan
Gaining Ratio
As a result of change in profit sharing ratio, one or more of the existing

partners gain some portion of other partners share of profit. The ratio of gain
of profit sharing ratio is called gaining ratio. It is calculated as follows:
The Sacrificing and Gaining Ratio (TS Grewal)
Illustration 1
Amit and Sumit are partners in a firm sharing profits in the ratio of 2 : 1. It was
decided by them to share profits equally w.e.f. 1st April, 2021. Calculate the
Sacrificing and Gaining Ratio.
Illustration 2
Lalit, Mukul and Chetan are partners sharing profits and losses equally. It was
decided that in future Chetan will get 1/5th share in profit.Calculate the New Profit-
sharing Ratio and sacrifice or gain of the partners.
Illustration 3
X, Y and Z are partners sharing profits in the ratio of 5: 3:2. Calculate new profit-
sharing ratio, sacrificing ratio, gaining ratio in each of the following cases:
Case 1. As per new agreement, Z takes 1/5th share from X.

Illustration 3
Case 2. As per new agreement, Z takes 1/5th share equally from X and Y.
Illustration 3
Case 3. As per new agreement, X, Y and Z decide to share the future profits and losses
equally.
Illustration 3
Case 4. As per new agreement, Z takes 1/5th share of X and 1/6th share of Y.
The Sacrificing and Gaining Ratio (DK Goel)
Illustration 1
A and B were partners in a firm sharing profits and losses in the ratio of 2: 1. With
effect from 1st April, 2021 they agreed to share profits and losses equally. Calculate
the individual partner's gain or sacrifice due to change in ratio.
The Sacrificing and Gaining Ratio (DK Goel)
Illustration 2
A, B and C were partners in a firm sharing profits and losses in the ratio of 3: 2:1. The
partners decide to share future profits and losses in the ratio of 2 : 2: 1. Indicate each
partner's gain or sacrifice due to change in ratio.
Change in PSR –
The Accounting
of Goodwill
😁😁😁
AS - 26
It is a valuable intangible asset. It is amortised over its estimated useful life. Accounting
Standard-26 (AS-26), Intangible Assets prescribes that goodwill should not be
recognised in the books of account unless consideration is paid for it.
Therefore, self-generated goodwill is not recognised in the books of account whereas
purchased goodwill is recognised. It is not recognised because its value is subjective
and is not evidenced by payment, i.e., amount does not exchange hand. On the other
hand, purchased goodwill is recognised being evidenced by payment.
ACCOUNTING STANDARD-26 (AS-26), 'INTANGIBLE ASSETS’

According to AS-26, 'Intangible Assets' goodwill should be recognised in the books only when
consideration in money or money's worth has been paid for it. Thus, in case of admission or
retirement/death of a partner or change in the profit-sharing ratio among partners, goodwill is
not recognised in the books of the firm because consideration in money or money's worth is not
paid for it. It should be adjusted through Partners' Capital Accounts. And, if goodwill is
recognised (raised), it should be written off immediately.
Accounting
Treatment of
Goodwill
Meaning
A change in profit sharing ratio basically implies that one partner is purchasing from
another partner, a share of profits previously belonging to the latter. The purchasing or
gaining partner must compensate the sacrificing partner by paying the proportionate
amount of goodwill.
The partner whose profit share increases, is a gaining partner and he/she compensates
partner or partners whose profit share(s) has (have) decreased, i.e., sacrificing partner(s).
The compensation payable by the gaining partner for his gain to the sacrificing partner
or partners is known as 'Goodwill' or 'Premium for Goodwill'. It is paid by the gaining
partners for their gained profit share to the sacrificing partners in their sacrificing ratio.
Example
For example, Dharam and Karam are partners sharing profits in the ratio of 3: 2. They
decide to share profits equally in future. Thus, Dharam will lose while Karam will gain
1/10th share.
Therefore, Karam should compensate Dharam for his gained profit share, i.e., 1/10th
share.
If the value of goodwill is 50,000, Karam will pay Dharam 5,000 (i.e., 50,000 × 1/10).
Journal Entries
1. When Goodwill Account is Not Raised:

(a) Gaining Partner’s Capital/ Current A/c Dr.
To Sacrificing Partner’s Capital/ Current A/c
2. When Goodwill Account is Raised and Written Off

(a) Goodwill A/c Dr.
To Partner’s Capital/ Current A/c
(In Old Profit Sharing Ratio)
(b) Partner’s Capital/ Current A/c Dr.

To Goodwill A/c
(In New Profit Sharing Ratio)
The Accounting of Goodwill (TS Grewal)
Illustration 4
Anu and Bala shared profits and losses in the ratio of 3: 2. With effect from 1st April,
2021, they decide to share profits equally. Goodwill of the firm was valued at 50,000.
Pass necessary Journal entry for compensating the sacrificing partner by the gaining
partner due to change in profit-sharing ratio.
The Accounting of Goodwill (TS Grewal)
Illustration 5
Kumar, Gupta and Kavita were partners in a firm sharing profits and losses equally.
The firm was engaged in the storage and distribution of canned juice and its godowns were
located at three different places in the city. Each godown was being managed individually by
Kumar, Gupta and Kavita. Because of increase in business activities at the godown managed by
Gupta, he had to devote more time. Gupta demanded that his share in the profits of the firm be
increased, to which Kumar and Kavita agreed. New profit-sharing ratio was agreed to be 1: 2: 1.
For this purpose, goodwill of the firm was valued at two years' purchase of the average profit of
last five years. The profits of the last five years were as follows:
4,00,000 & 4,80,000 & 7,33,000 & 33,000(Loss) & 2,20,000
You are required to:

(a) Calculate the goodwill of the firm.
(b) Pass necessary Journal entry for the treatment of goodwill on change in profit-
sharing ratio of Kumar, Gupta and Kavita.
The Accounting of Goodwill (DK Goel)
ILLUSTRATION 21.
A, B and C are partners sharing profits and losses in the ratio of 5 : 4 : 1. It was
decided that with effect from 1st April, 2021 the profit sharing ratio will be 9: 6:5.
Goodwill is to be valued at 2 year's purchase of average of 3 year's profits. The profits
for 2018-19, 2019-20 and 2020-21 were 48,000, 42,000 and 60,000 respectively.
Pass the necessary journal entry for the treatment of goodwill.

ILLUSTRATION 22
P, Q and R are partners sharing profits equally. They decided that in future R will get
1/5th share in profits. On the day of change, firm's goodwill is valued at ₹3,00,000.
the necessary journal entry.
ILLUSTRATION 23
X and Y were partners sharing profits and losses in the ratio of 3: 1. They decided that
with effect from 1st April 2021, they would share profits and losses in the ratio of 5:3.
The partnership deed provides that in the event of any change in profit sharing ratio,
the goodwill should be valued at the total of two year's profits preceding the date the
decision became effective. The profits for 2018-19, 2019-20 and 2020-21 were
*60,000, 70,000 and 90,000 respectively. Pass the necessary Journal entry to give
effect to the above arrangement.
Change in PSR –
The
Accumulated
Profits & Losses
😁😁😁
Meaning
Meaning
If, at the time of change in profit-sharing ratio, reserves, accumulated profits and losses
exist in the books of the firm, they are
transferred to the Partners' Capital/ Current Account
in their
old profit-sharing ratio
because reserves, accumulated (undistributed) profits and losses as on the date of
change in PSR were
earned before the reconstitution of the firm.
Accumulated Profits means Profits earned but not distributed or made using the share of
partners.
Accumulated Losses means losses accrued but not transferred to partner’s capital
account or loss/ expense yet not written off.
Journal Entries
1. For Accumulated Profits:

Reserve A/c Dr.
Profit and Loss A/c (Cr. Balance) Dr.
Workmen Compensation Reserve A/c Dr.
Investment Fluctuation Reserve A/c Dr.
To All Partner’s Capital/ Current A/c (OPSR)
2. For Accumulated Losses:

All Partner’s Capital/ Current A/c (OPSR) Dr.
To Profit and Loss A/c (Dr. Balance)
To Deferred Revenue Expenditure A/c
Adjustments to be Made For:
(i) Workman Compensation Fund
(ii) Investment Flucuation Reserve
(iii) Deferred Revenue Expenditure
(iv) Without Closing Any Account

Workmen
Compensation
Reserve
Workmen Compensation Reserve
Workmen Compensation Reserve is

a reserve set aside (appropriated) out of firm's profits
to meet possible liability (claim) on account of compensation to employees, if it arises
(say, because of an accident).
It means, a claim may or may not arise. It also means that claim may be equal to or less
or more than amount of reserve. At the time of change in profit sharing ratio, its
accounting treatment is as follows:
1. When Claim Does not Exist

2. When Claim Exists
(a) When Claim is Equal to Reserve
(b) When Claim is Less Than Reserve
(c) When Claim is More Than Reserve
When Claim Does Not Exist

When Claim is Equal to Reserve
When Claim is Less Than Reserve
When Claim is More Than Reserve
Illustration 6 (Treatment of Workmen Compensation Reserve).

Ram, Shyam and Mohan sharing profits and losses in the ratio of 4: 3:2.
They decided to share future profits and losses in the ratio of 2 : 3:4 with effect from 1st April,
2021. An extract of their Balance Sheet as at 31st March, 2021 is:
Liabilities Side: Workmen Compensation Reserve ₹90,000
Show the accounting treatment under the following alternative cases:

Case 1.When no information as to claim is given.
Case 2. When there is no claim.
Case 3. When a claim on account of workmen compensation is 45,000.
Case 4.Whena claim on account of workmen compensation is 99,000.








Investment
Fluctuation Reserve
Investment Fluctuation Reserve
Investments are recorded in the books of the firm at cost. However, its market value
may be equal to or lower or higher than its book value.
Investments Fluctuation Reserve is
a reserve set aside out of profits to meet fall in the market value of investments.
At the time of change in profit-sharing ratio, the accounting of Investments Fluctuation
Reserve is as follows:
1. When Market Value is Equal To Book Value

2. When Market Value is Lower Than Book Value
(a) Fall is Less Than Reserve
(b) Fall is Equal to Reserve
(c) Fall is More than Reserve
3. When Market Value is Higher Than Book Value
When Market Value is Equal To Book Value
When Market Value is Lower Than Book Value
& Fall is Less Than Reserve
& Fall is Equal to Reserve
& Fall is More than Reserve
Illustration 7 (Treatment of Investments Fluctuation Reserve).

Gaurav, Sourav and Kabir sharing profits and losses in the ratio of 4: 3:2, decide to
share future profits and losses in the ratio of 2 : 3:4 with effect from 1st April, 2021.
An extract of their Balance Sheet as at 31st March, 2021 is:
Liabilities Side: Investments Fluctuation Reserve 18,000

Assets Side: Investments (At cost) 2,00,000
Case 1. When there is no other information.

Case 2. When market value of investments is 2,00,000.
Case3. When market value of investments is 1,91,000.
Case 4.When market value of investments is 2,18,000.












Deferred Revenue
Expenditure
Deferred Revenue Expenditure
It is a revenue expenditure which does not bring any asset into existence but its benefit
is expected to last in more than one accounting period. Deferred Revenue Expenditure
is written off over the period during which its benefit is likely to accrue. They are also
known as fictitious assets. At the time of change in profit-sharing ratio, Deferred
Revenue Expenditure is written off by debiting Partners' Capital or Current Accounts in
their old profit-sharing ratio.
The Journal entry is:

Partners' Capital (Current) A/c Dr.
To Deferred Revenue Expenditure A/c (OPSR)
Deferred Revenue Expenditure
Illustration 8
Hardeep and Sandeep are partners sharing profits in the ratio of 4: 1. They decide to
share profits equally w.e.f. 1st April, 2021. Their Balance Sheet as at 31st March, 2021
shows a balance of advertisement suspense of 20,000. Pass the Journal entry at the
time of changein profit-sharing ratio.
Important Note
Important Not (Must Remember)
1. Reserves, Accumulated Profits and Losses are distributed even if the question is
silent.
2. Workmen Compensation Reserve is a reserve set aside out of profit to meet the
liabilitytowards workmen, if any, that may arise.
3. Investments Fluctuation Reserve is a reserve set aside out of profit to meet the
fall in Value of Investments, i.e., when Market Value of Investment is lower than
its Book Value.
4. Deferred Revenue Expenditure is a revenue expenditure written off in more than

one accounting period. Deferred Revenue Expenditure to the extent not written
off is carried forward in the Balance Sheet. It being a fictitious asset is debited to
Partners' Capital Accounts in their old profit-sharing ratio at the time of change
in profit-sharing ratio.
Change in PSR –
The
Revaluation A/c
😁😁😁
Meaning
Meaning
Assets are revalued and the liabilities are reassessed when the profit-sharing
ratio changes and the gain (profit) or loss arising from it is credited or debited
to Partners' Capital Accounts in their old profit-sharing ratio.
The reason for revaluation of assets and reassessment of liabilities is that any
increase or decrease in the value of assets and liabilities up to the date of
change in profit-sharing ratio is for the period before the change in profit-
sharing ratio.
Therefore, it is shared by the partners in their old profit-sharing ratio.
Note: Revaluation Account Is Also Known As Profit And Loss Adjustment Account
The partners may decide to:
(i) Record revised (changed) values of assets and liabilities in the books
(ii) Not to record the revised values of assets and liabilities in the books
Record revised
(changed) values
of assets and
liabilities in the
books
Record revised (changed) values of assets and liabilities in the books
When revised (changed) values of assets and liabilities are to be recorded Revaluation
of assets and reassessment of liabilities are recorded in an account 'Revaluation
Account' or 'Profit and Loss Adjustment Account’.
(a) Increase in the value assets and decrease in the amount of liabilities are credited to
this account
(b) while decrease in the value of assets and increase in the amount of liabilities are
debited to this account.
(c) Unrecorded assets, if any, are credited and
(d) unrecorded liabilities are debited to this account.
(e) The balance in the account is gain (profit), if total of credit side is more than the
total of debit side and
(f) loss, if total of debit side is more than the total of credit side.
(g) Gain (Profit or loss so determined is credited or debited to Partners' Capital (or
Current) Accounts their old profit-sharing ratio.
Specimen of Revaluation Account
Particular Amount Particular Amount
Specimen of Revaluation Account
To Assets A/c (Individually) By Assets A/c (Individually)
-Decrease in value on revaluation -- -Increase in value on revaluation --
To Liabilities A/c (Individually) By Liabilities A/c (Individually)

-Increase in amount on reassessment -- -Decrease in amount on reassessment --
To Unrecorded Liabilities A/c -- By Unrecorded Assets A/c --
To Partner's Capital A/c (Remuneration) -- By Loss* on Revaluation transferred to --

Partners' Capital (or Current) A/cs
To Cash/Bank A/c (Expenses) --
To Gain (Profit)* on Revaluation transferred --

to Partners' Capital (or Current) A/cs
xx xx
Illustration 14.
Anil, Manvi and Payal are partners sharing profits and losses in the ratio of 5: 3:2.
Their Balance Sheet as at 31st March, 2021 stood as follows:
Capital A/cs: Land and Building 2,60,000
Anil 3,50,000 Machinery 3,50,000
Manvi 2,50,000 Stock 90,000
Payal 3,00,000 Bills Receivable 70,000
General Reserve 20,000 Sundry Debtors 1,00,000
Workmen Compensation Reserve 30,000 Cash in Hand 25,000
Sundry Creditors 50,000 Cash at Bank 1,05,000
10,00,000 10,00,000
They decided to share profits and losses in the ratio of 2: 2:1 w.e.f.agreed that:
(i) Land and Building be appreciated by 10%.
(ii) Machinery be reduced by 15%.
(iii) Stock be increased to 1,00,000.
(iv) Provision for Doubtful Debts be created @ 5% on Sundry Debtors.
(v) A Creditor of 5,000 is not to claim the dues. Hence, it is to be written back
(vi) A claim on account of Workmen Compensation is 10,000.
(vii) An expense of 2,000 was paid by the firm for getting the value of Land and Building certified from a
Chartered Engineer.
Pass the Journal entries and prepare Revaluation Account.
Not To Record revised
(changed) values
of assets and
liabilities in the
books
Not to Record revised (changed) values of assets and liabilities in the books
When revised (changed) values of assets and liabilities are not to be recorded Gain (Profit)
or Loss on Revaluation of Assets and Reassessment of Liabilities is
adjusted through Partners' Capital Accounts
by passing an adjustment entry
by debiting/crediting the Capital (or Current) Accounts
of gaining partners and crediting/debiting the sacrificing partners.
Illustration 15.
A, B and Care sharing profits and losses in the ratio of 5:3:2. They decided to share
future profits and losses in the ratio of 2:3:5 with effect from 1st April, 2021.
They also decide to record the effect of the following revaluations without affecting
the book values of the assets and liabilities by passing an Adjustment Entry:
Book Values Revised Values

Land and Building 5,00,000 5,50,000
Plant and Machinery 2,50,000 2,40,000
Sundry Creditors 60,000 55,000
Outstanding Expenses 60,000 75,000
Pass necessary Single Adjustment Entry.

Illustration 16.
Radhika, Bani and Chitra were partners in a firm sharing profits and losses in the
ratio of 2:3:1.
With effect from 1st April, 2018, they decided to share future profits and losses in the
ratio of 3:2:1.
On that date their Balance Sheet showed a debit balance of 24,000 in Profit and Loss
Account and a balance of 1,44,000 in General Reserve.
It was also agreed that:

(a) The goodwill of the firm be valued at 1,80,000.
(b) The Land (having book value of ₹ 3,00,000) will be valued at 4,80,000.
Pass the necessary Journal entries for the above changes.

Change in PSR –
The
Balance Sheet
😁😁😁
Preparation of
The Balance Sheet
of
The Re-constituted
Firm
Meaning
Reconstitution of the firm results in a change in the

capitals of partners and in the value of assets and
amount of liabilities.
This shall also require preparation of the Balance Sheet
of the new firm.
Before we prepare the Balance Sheet of the new firm,
accounts that have been affected because of the
reconstitution are prepared.
Illustration 17.
Ashok, Bhim and Chetan were partners in a firm sharing profits in the ratio of 3: 2:1,
Their Balance Sheet as on 31st March, 2015 was as follows:
Creditors 1,00,000 Land 1,00,000
Bills Payable 40,000 Building 1,00,000
General Reserve 60,000 Plant 2,00,000
Capital A/cs: Stock 80,000
Ashok 2,00,000 Debtors 60,000
Bhim 1,00,000 Bank 10,000
Chetan 50,000
5,50,000 5,50,000
Ashok, Bhim and Chetan decided to share the future profits equally, w.e.f. 1st April, 2015.
For this it was agreed that:
(a) Goodwill of the firm be valued at 3,00,000.
(b) Land be revalued at 1,60,000 and building be depreciated by 6%.
(c) Creditors of 12,000 were not likely to be claimed and hence be written off.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the re-constituted firm.
Illustration 18.
Amar, Tarun and Akhil are partners sharing profits and losses in the ratio of 5: 3:2.
Their Balance Sheet as at 31st March, 2021 was as follows:
Sundry Creditors 1,60,000 Cash in Hand 25,000
Salaries Payable 30,000 Bank Balance 1,25,000
General Reserve 80,000 Bills Receivable 10,000
Profit and Loss A/c 30,000 Sundry Debtors 1,00,000
Capital A/cs: Less: Provision for Doubtful Debts (10,000)
Amar 3,00,000 Stock 2,00,000
Tarun 1,80,000 Furniture 50,000
Akhil 1,20,000 Computers 3,00,000
Air-Conditioners 1,00,000
9,00,000 9,00,000
Profit-sharing ratio among the partners was agreed to be 2: 2: 1 w.e.f. 1st April, 2021. They agreed to the following:
(i) Stock to be increased to 2,20,000.
(ii) Provision for Doubtful Debts to be reduced by 2,000.
(iii) Furniture to be reduced by 20%.
(iv) Computers to be reduced to 2,70,000.
(v) Goodwill of the firm is valued at 1,00,000.
The partners decided to carry the assets and liabilities at their existing values. They also decided that General
Reserve and Profit and Loss Account balances be carried at the same values. Pass an Adjustment entry giving effect
to the above arrangement and prepare Balance Sheet after adjustments.
Illustration 19.
Parth, Raman and Zaisha are partners in a firm manufacturing furniture.
They have been sharing profits and losses in the ratio of 5: 3:2. From 1st April, 2021, they
decided to share future profits and losses in the ratio of 2 : 5:3. Their Balance Sheet showed a
debit balance of 4,000 in Profit and Loss Account; balance of 36,000 in General Reserve and a
balance of 12,000 in Workmen's Compensation Reserve. It was agreed that:
(i) The goodwill of the firm be valued at 76,000.
(ii) The Stock (book value of 40,000) was to be depreciated by 8%.
(iii) Creditors amounting to 900 were not likely to be claimed. Hence, be written back.
(iv) Claim on account of Workmen's Compensation was 20,000.
(v) Investments (book value 38,000) were revalued at 40,000.
Pass necessary Journal entries for the above.

Adjustment of
Capital
Meaning
The partners may decide that the capitals shall be in profit-sharing ratio of the
partners. Adjustment will be required to give effect to it.
(a) Partner (partners) whose capital (capitals) falls (fall) short or has (have)
shortage of the required capital may have to bring more capital
(b) While partner (partners) whose capital (capitals) is (are) in surplus (excess)
of the required capital may withdraw surplus or excess capital.
Shortage or Surplus of Capital may be adjusted through Partners' Current

Accounts.
Thankyou
“Your Accounts Best Friend”

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01 Change in PSR Marathon

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Change in Profit Sharing Ratio

Topics Sub Topic

The Sacrificing Ratio Sacrificing and Gaining Ratio

The Accounting of Goodwill Existing and New Goodwill

The Revaluation of Assets and Reassessment of Liabilities Revaluation Account

The Balance Sheet of The Reconstituted Firm Adjustment of Capital Accounts

11th & 12th

We are happy to present a

Use Referral Code:

The Sacrificing Ratio Sacrificing and Gaining Ratio

The Accounting of Goodwill Existing and New Goodwill

The Revaluation of Assets and Reassessment of Liabilities Revaluation Account

The Balance Sheet of The Reconstituted Firm Adjustment of Capital Accounts

Partnership is the result of an agreement between persons for

Any change in the partnership agreement brings to an end the

The change in the agreement results in changes in the

In such a case, although the firm continues, it amounts to the

(i) Change in the profit-sharing ratio among the existing partners.

(ii) Admission of a partner or partners.

(iii) Retirement of a partner.

(iv) Death of a partner.

(v) Amalgamation of two or more partnership firms.

The change is necessitated due to the change in capital contribution or in active

Change in the profit-sharing ratio among the existing partners results in

Change in Profit-sharing Ratio leads to dissolution of partnership and not of the

1. Determination of Sacrificing Ratio and Gaining Ratio

3. Accounting of Reserves, Accumulated Profits and Losses

4. Revaluation of Assets and Reassessment of Liabilities

As a result of change in profit sharing ratio, one or more of the existing

Case 1. As per new agreement, Z takes 1/5th share from X.

ACCOUNTING STANDARD-26 (AS-26), 'INTANGIBLE ASSETS’

1. When Goodwill Account is Not Raised:

2. When Goodwill Account is Raised and Written Off

(b) Partner’s Capital/ Current A/c Dr.

You are required to:

Pass the necessary journal entry for the treatment of goodwill.

1. For Accumulated Profits:

2. For Accumulated Losses:

(i) Workman Compensation Fund

(ii) Investment Flucuation Reserve

(iii) Deferred Revenue Expenditure

(iv) Without Closing Any Account

Workmen Compensation Reserve is

1. When Claim Does not Exist

When Claim Does Not Exist

Illustration 6 (Treatment of Workmen Compensation Reserve).

Show the accounting treatment under the following alternative cases:

Illustration 6 (Treatment of Workmen Compensation Reserve).

Show the accounting treatment under the following alternative cases:

Illustration 6 (Treatment of Workmen Compensation Reserve).

Show the accounting treatment under the following alternative cases:

Illustration 6 (Treatment of Workmen Compensation Reserve).

Show the accounting treatment under the following alternative cases:

Illustration 6 (Treatment of Workmen Compensation Reserve).

Show the accounting treatment under the following alternative cases:

1. When Market Value is Equal To Book Value

Illustration 7 (Treatment of Investments Fluctuation Reserve).

Liabilities Side: Investments Fluctuation Reserve 18,000

Case 1. When there is no other information.

Illustration 7 (Treatment of Investments Fluctuation Reserve).

Liabilities Side: Investments Fluctuation Reserve 18,000

Case 1. When there is no other information.

Illustration 7 (Treatment of Investments Fluctuation Reserve).

Liabilities Side: Investments Fluctuation Reserve 18,000