Question

X, Y and Z were partners sharing profits in the ratio of 5 : 3 : 2. They decided to share future profits in the ratio of 2 : 3 : 5 with effect from 01-04-2017. They decide to record the effect of the following without affecting their book value.
1. Profit and Loss A/c Rs 24,000,
2. Advertisement Suspense A/c Rs 12,000.
Pass the necessary adjustment entry.

Answer 1

It means Y’s share of Profit No Change and Sacrifice of X is equal to gain to Z 

= \(\frac{3}{10}\)
Total Amount of Adjustment = 24,000 + 12,000 

= 36,000

Z’s Share =  \( = \frac { 36,000 \times 3 }{ 10 } \)

= 10,800

Z’s share received before 

= 36,000 x \(\frac { 2 }{ 10 } = Rs. 7,200\)

Difference amount = 3,600
Journal Entry
Z’s Capital A/c Dr. 3,600
To X’s Capital A/c 3,600
(Being adjustment made)