P and Q are partners in a firm sharing profits in the ratio of 3 : 2. They decided to share profits equally in future. Their Balance Sheet showed 50,000 in General Reserve and 20,000 as Profit and Loss (Dr.) Balance. The adjusted entry, if they don't wish to alter General Reserve and Profit and Loss is:

Debit Q's Capital A/c by Rs 3,000, Credit P's Capital A/c by Rs 3,000

The correct answer is Option (3) - Debit Q's Capital A/c by Rs 3,000, Credit P's Capital A/c by Rs 3,000.

Old ratio = 3:2
New ratio = 1:1
Sacrificing share of P = 3/5 - 1/2
                                = (6-5)/10
                                = 1/10

Sacrificing share of Q = 2/5 - 1/2
                                = (4-5)/10
                                = - 1/10 (GAIN)

General reserve = 50000
P & L Dr. balance = 20000
Net balance = (50000 - 20000)
                  = ₹30000

Share = 30000 x 1/10
          =3000

Gaining partner will compensate sacrificing partner for ₹3000.

SO, JOURNAL ENTRY WILL BE-
Q's Capital A/c   Dr. ₹3,000
    To P's Capital A/c       ₹3,000