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= 5 (Sacrifice)
30
3 1 9 – 10
Y’s share = − =
10 3 30
–1
= (Gain)
30
6 − 10 –4
Z’s share = = = (Gain)
30 30
1 4
So, Y’s Gain = , Z’s Gain = ,
30 30
..
and X’s Sacrifice=
30
2 5 1
Anubhav = − = gain
5 10 10
2 3 1
Shagun = – = sacrifice
5 10 10
1 2
Pulkit = – = nil
5 10
Assertion-Reason Questions
For the following questions two statements are given: One labelled as
Assertion (A) and the other is labelled as Reason (R). Select the correct
answer to these questions from the codes (a), (b), (c) and (d) as given below:
(a) (A) is correct but (R) is wrong.
(b) Both (A) and (R) are correct, but (R) is not the correct explanation of (A).
(c) Both (A) and (R) are correct, and (R) is the correct explanation of (A).
(d) (A) is wrong but (R) is correct.
Read the following passages and answer the question that follows:
6. A, B and C who are presently sharing profits and losses in the ratio
of 5 : 3 : 2 decide to share future profits and losses in the ratio of
2 : 3 : 5. Give the Journal entry to distribute Investment Fluctuation
Reserve of ` 20,000 at the time of change in profit sharing ratio,
when investment (market value ` 95,000) appears in the books at `
1,00,000.
Ans. Journal Entry
Date Particulars L.F. Debit (`) Credit
(`)
(i) Investment Fluctuation Reserve A/c Dr. 20,000
To Investment A/c 5,000
To A’s Capital Account 7,500
To B’s Capital Account 4,500
To C’s Capital Account 3,000
(Being amount of Investment
Fluctuation Reserve distributed after
adjustment)
Caution
Students mostly forget to adjust book value of investment with market value
of adjustment i.e. ` 5000.
Related Theory
Investment fluctuation reserve is always distributed between old
partners in old ratio.
(2)Treatment of Goodwill
Y's Capital A/c will be debited with the amount
1
=× 2,00,000 = ` 40,000
5
(3)Distribution of Reserves
Question is silent about distribution, so we shall distribute reserves in
old ratio.
1
X = ` 1,00,000 × = ` 80,000
5
1
Y = ` 1,00,000 × = ` 20,000
5
(4)Revaluation of Assets
Revaluation A/c
Amount Amount
Particulars Particulars
` `
To Machine 10,000 By Stock 10,000
To Debtors (Bad Debts) 10,000 By X's Capital 8,000
By Y's Capital 2,000
20,000 20,000
Capital A/c
X Y X Y
Particulars Particulars
` ` ` `
To Revaluation 8,000 2,000 Bal. b/d 3,00,000 2,00,000
To X's Capital 40,000 By Reserves 80,000 20,000
To Cash 58,000 By Y's Capital 40,000
Bal. c/d 3,54,000 2,36,000 By Cash 58,000
4,20,000 2,78,000 4,20,000 2,78,000
(5)Adjustment of Capitals
Adjusted Capital
X = 3,00,000 + 80,000 + 40,000 – 8,000 = 4,12,000
Y = 2,00,000 + 20,000 – 2,000 – 40,000 = 1,78,000
` 5,90,000
New Capital
3
X = ` 5,90,000 × = ` 1,18,000 × 3 = ` 3,54,000
5
Difference
X = ` 3,54,000 – ` 4,12,000 = ` 58,000 (withdrawn)
Y = ` 2,36,000 – ` 1,78,000 = ` 58,000 (bring)
Caution
Students are advised to follow the instuction given here.
Requires adjustments when there is change in profit sharing ratio.
Calculation of Gaining and sacrifing ratio 1 (Given in questions)
• Treatment of Goodwill 2 (Given in questions)
• Treatment of Reserves 3 (Given in questions)
• Revaluation of Assets 4 (Given in questions)
• Adjustment of Capital 5 (Given in questions)
So, adjustment 1, 2, 3, 4, 5 (all above adjustment are given in questions).
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