Accountancy Part AAdmission of a Partner

Ritesh, Deven and Keshav are partners sharing profits in the ratio of…

Ritesh, Deven and Keshav are partners sharing profits in the ratio of 3:2:1. They decided to change their profit sharing ratio from 1st April 2026, to 5:3:2. On that date, they have Workmen Compensation Reserve Rs. 1,80,000 and General Reserve Rs. 1,35,000. They have decided not to distribute the General Reserve. Choose the correct statement from the following:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Deven's Capital Account is to be credited with Rs. 60,000 and Rs. 4,500.

On a change in the profit sharing ratio, a reserve that is distributed goes to the partners in the old ratio. A reserve that is not distributed is adjusted instead: the partner who gains is debited and the partner who sacrifices is credited with his share of it.

Workmen Compensation Reserve, distributed in the old ratio 3 : 2 : 1:

Deven's credit = Rs. 1,80,000 × 2/6 = Rs. 60,000

General Reserve, not distributed (common denominator 60):

Ritesh: old 3/6 = 30/60, new 5/10 = 30/60, no change
Deven: old 2/6 = 20/60, new 3/10 = 18/60, sacrifice 2/60
Keshav: old 1/6 = 10/60, new 2/10 = 12/60, gain 2/60
Deven's credit = Rs. 1,35,000 × 2/60 = Rs. 4,500
Keshav's debit = Rs. 4,500

So Deven is credited twice: Rs. 60,000 and Rs. 4,500.

NCERT (2026-27 edition):
Change in Profit Sharing Ratio among the Existing Partners – “… Any change, in the profit sharing ratio, like admission of partner, may also involve adjustments in respect of revaluation of assets and liabilities, transfer of accumulated profit and losses to partners' capital accounts in the old profit sharing ratio and adjustment of partners' capitals, if specified, so as to make them proportionate to the new profit sharing ratio. All this is done in the same way as in case of admission of a partner.”