X,Y & Z are partners in the firm sharing profits and losses in the ratio of 3:2:1. Z retires from the firm on 31st March 2021. On the date of retirement of Z, a debit balance of profit & loss A/c of ₹36,000 appeared in the books of account. What will be the journal entry for this?
Answer & explanation
Correct answer: option 1
The correct answer is option 1-
X's Capital A/c Dr.. ₹18,000
Y's Capital A/c Dr.. ₹12,000
Z's Capital A/c Dr.. ₹6,000
To P & L A/c ₹36,000
(P & L balance distributed)
As, the debit balance of profit and loss account is a loss for the firm that's why it is debited to partners' capital A/c which shows the reduction in their capital account. The journal entry for this is as follows-
X's Capital A/c Dr.. ₹18,000
Y's Capital A/c Dr.. ₹12,000
Z's Capital A/c Dr.. ₹6,000
To P& L A/c ₹36,000
(P & L balance distributed)