X, Y, Z are equal partners. They have decided to change their profit sharing ratio as 3 : 2 : 1. At the time of the change in ratio, General Reserve amounted to ₹6,000, which they want to carry forward in reconstituted partnership. To record the above, following journal entry will be passed:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4)-
X's capital A/c ₹1,000
To Z's capital A/c ₹1,000.
Old ratio = 1:1:1 (X, Y, Z)
New ratio = 3:2:1 (X, Y, Z)
Sacrifice of X = 1/3 - 3/6
= (2-3)6
= -1/6 (GAIN)
Sacrifice of Y = 1/3 - 2/6
= (2-2)/6
= 0 NO SACRIFICE NO GAIN
Sacrifice of Z = 1/3 - 1/6
= (2-1)6
= 1/6
General reserve = ₹6000
Share in GR = 6000 x 1/6
= ₹1000
As Z is sacrificing and X is gaining so partner X will compensate Partner Z. Journal entry for this-
X's capital A/c Dr. ₹1,000
To Z's capital A/c ₹1,000