Question : A, B and C are partners sharing profits in the ratio of 3: 2: 1. On March 31, 2018, C died and a new profit-sharing ratio was agreed upon at 3: 1. They also decided to record the effect of the following without affecting their book values:
General Reserve 1,00,000
Profit and Loss Account 45,000
Advertisement Suspense Account 25,000
Adjustment entry will be
Option 1: Debit A’s Capital A/c by Rs.30,000; Credit B’s Capital A/c by Rs.10,000 and C’s Capital A/c by Rs.20,000.
Option 2: Debit B’s Capital A/c by Rs.30,000; Credit A’s Capital A/c by Rs.10,000 and C’s Capital A/c by Rs.20,000.
Option 3: Debit A’s Capital A/c by Rs.20,000; Credit B’s Capital A/c by Rs.10,000 and C’s Capital A/c by Rs.10,000
Option 4: None of the above
Correct Answer: Debit A’s Capital A/c by Rs.30,000; Credit B’s Capital A/c by Rs.10,000 and C’s Capital A/c by Rs.20,000.
Solution : Answer = Debit A’s Capital A/c by Rs.30,000; Credit B’s Capital A/c by Rs.10,000 and C’s Capital A/c by Rs.20,000.
A's Capital A/c Dr. 30,000
To C's Capital A/c = 20,000
To B's Capital A/c = 10,000
(Total Value of General Reserve + Profit and Loss)
= 1,00,000 + 45000 +(25000)
= 1,20000
M.R - OR
A= 3/4 - 3/6 = 9-6/12 = 3/12 × 1,20000 = 30,000
B= 1/4 - 2/6 = 3-4/12 = -1/12 = 10,000
Hence, the correct option is 1.
