CHEQUE IN PROFIT SHARING RATIO
Q1. A, B and C are partners haring profits and losses in the ratio of 5 : 4 : 1. It was decided that with effect
from 1st April, 2021 the profit sharing ratio will be 9 : 6 : 5. Goodwill is to be valued at 2 year’s
purchase of 3 year’s profits. The profits for 208 – 19, 2019 – 20 and 2020 – 21 were Rs. 48,000, Rs.
42,000 and Rs. 60,000 respectively.
Pass the necessary journal entry for the treatment of goodwill.
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Q2. P, Q and R are partners sharing profits equally. They decided that in future R will get th share in
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profits. On the day of change, firm’s goodwill is valued at Rs. 3,00,000. Make the necessary journal
entry.
Q3. X, Y and Z are partners sharing profits in the ratio of 4 : 3 : 2. From April 1, 2022, they decided to
share the profits equally. On that date their books showed the following items:
Rs.
Profit & Loss Account (Cr.) 1,20,000
General Reserve 45,000
Workmen Compensation Reserve 60,000
Advertisement Suspense Account (Dr.) 90,000
Record the necessary journal entries.
Q4. Mita, Gopal and Farhan were partners sharing profits and losses in the ratio 3 : 2 : 1. On 31 st March,
2022 they decided to change the profit sharing ratio to 5 : 3 : 2. On this date, the Balance Sheet
showed the following:
Rs.
Deferred Advertisement Expenditure 30,000
Contingency Reserve 9,000
Workmen Compensation Reserve 48,000
A claim on account of workmen compensation of Rs. 60,000 was admitted. Goodwill was valued at
Rs. 4,80,000. Pass the necessary journal entries for the above transactions in the books of the firm on
its reconstitution.
Q5. A, B and C are partners in a firm sharing profits in the ratio of 3 : 3 : 2. From 1 st April, 2021, they
decided to share profits equally. On that date following balances appeared in their books:
Rs.
Workmen compensation Reserve 1,20,000
Investment Fluctuation Reserve 20,000
Investments (at cost) 4,00,000
It was agreed that:
(i) Goodwill of the firm be valued at Rs. 1,80,000.
(ii) Investments be valued at Rs. 3,40,000.
Pass necessary journal entries.
Q6. A and B are partners in a firm sharing profits in the ratio of 4 : 3. On March 31, 2021 their Balance
Sheet showed General Reserve of Rs. 35,000. On that date they decided to admit Sewak as a new
partner and the new profit-sharing ratio will be 5 : 3 : 2. Record necessary journal entries in the
books of the firm under the following circumstances:
(i) When they want to transfer the general reserve to their capital accounts.
(ii) When they don’t want to transfer general reserve in their capital accounts but prefer to record an
adjustment entry for the same.
Q7. A, B and C are partners sharing profits and losses in the ratio of 2 : 3 : 4. They decided to share future
profits and losses in the ratio of 4 : 3 : 2. They also decided to record the effect of the following
without affecting their book values:
Rs.
General Reserve 40,000
Profit & Loss A/c 20,000
Advertisement Suspense A/c 15,000
You are required to give the necessary single journal entry.
Q8. Brijesh, Charu and Dilip are partners sharing profits and losses in the ratio of 3 : 2 : 1. Their balance
sheet as at 31st March, 2021 was as follows:
Liabilities Amount Assets Amount
Creditors 87,000 Charu 30,000
Reserves 42,000 Debtors 62,000
Profit & Loss A/c (Profits) 21,000 Less: Provision for
Capital Accounts doubtful debts 2,000 60,000
Brijesh 3,00,000 Stock 1,80,000
Charu 3,00,000 Furniture 30,000
Dilip 50,000 6,50,000 Plant 2,00,000
Building 3,00,000
8,00,000 8,00,000
The partners agreed that from 1st April 2021 they will share profits and losses in the ratio of 4 : 4 : 1.
They agreed that:
(i) Stock is to be valued at 20% less.
(ii) Provision for doubtful debts to be increased by Rs. 1,500.
(iii) Furniture is to be depreciated by 20% and plant by 15%.
(iv) Rs. 3,500 are outstanding for salaries.
(v) Building is to be valued at Rs. 3,50,000.
(vi) Goodwill is valued at Rs. 45,000.
Partners do not want to record the altered values of assets and liabilities in the books and want to
leave the reserves and profits undisturbed.
You are required to pass a single journal entry to give effect to the above. Also prepare the revised
balance sheet.
Q9. Shanker, Babita and Vishal are partners in a firm in the ratio of 5 : 4 : 2. On 1 st April, 2019 they
decided to share profits in future in the ratio of 4 : 3 : 2. On this date general reserve was Rs. 34,900
and loss on revaluation of assets and liabilities was Rs. 5,200. It was decided that adjustment should
be made without altering the figures of assets and liabilities in the Balance Sheet. Make adjustment
by a single journal entry.
Q10. Raka, Seema and Mahesh were partners sharing profits and losses in the ratio of 5 : 3 : 2. With effect
from 1st April, 2019, they mutually agreed to share profits and losses in the ratio of 2 : 2 : 1.
On that date, there was a workmen’s compensation reserve of Rs. 90,000 in the books of the firm. It
was agreed that:
(i) Goodwill of the firm be valued at Rs. 70,000.
(ii) Claim for workmen’s compensation amounted to Rs. 40,000.
(iii) Profit on revaluation of assets and re-assessment of liabilities amounted to Rs. 40,000.
Pass necessary journal entries for the above transactions in the books of the firm.
