Question

X and Yare partners sharing profits in the ratio of 2:1. On 31st March, 2016, their Balance Sheet shot General Reserve of Rs.60,000. It was decided that in future they will share profits and losses in the ratio of 3:2. Pass necessary Journal entry in each of the following alternative cases: 

(i) If they do not want to show General Reserve in the new Balance Sheet. 

(ii) If they want to show General Reserve in the new Balance Sheet.

Answer 1

(i) If they do not want to show general reserve in the new Balance sheet

WN1. Calculation of share of General reseve

(ii) If they want to show general reserve in the new balance sheet

Working Notes :

1.Calculation of Gain /sacrifice

Sacrificing Ratio = Old Ratio - New Ratio

2. Calculation of compensation by Y to X