Question : M, N and O are partners in a firm sharing profits in the ratio equally Their Balance Sheet as at 31-3-2019 showed a debit balance of Profit & Loss A/c 90,000. From 1-4-2019 they will share profits 4:3:2. In the necessary journal entry to give effect to the above arrangement when M, N and O decided not to close the Profit & Loss Account:
Option 1: Dr. M by Rs 10,000; Cr. O by Rs 10,000
Option 2: Cr. M by Rs 10,000; Dr. O by Rs 10,000
Option 3: Dr. M by Rs 20,000; Cr. O by Rs 20,000
Option 4: Cr. M by Rs 20,000; Dr. O by Rs 20,000
Correct Answer: Dr. M by Rs 10,000; Cr. O by Rs 10,000
Solution : Answer = Dr. M by Rs 10,000; Cr. O by Rs 10,000
Sacrificing Ratio = O.R.- N.R.
M = 1/3 - 4/9 = 3-4/9 = -1/9 x 90,000 = 10,000
N = 1/3 -3/9 = 3-3/9 = 0
O = 1/3 - 2/9 = 3-2/9 = 1/9 x 90,000 = 10,000
M's Capital A/c Dr 10,000
To O's Capital A/c 10,000
Hence, the correct option is 1.