X and y are partners in a firm sharing profits in the ratio of 1:1.on ...
Journal Entries for Admitting a New Partner Without Transferring General Reserve to Capital Accounts
When a new partner is admitted to a firm, the existing partners may decide to adjust their profit sharing ratio. In such cases, the general reserve may be transferred to the capital accounts of the partners. However, in some cases, the partners may prefer not to transfer the general reserve to the capital accounts and instead record an adjustment entry for the same. The following are the journal entries that need to be recorded in the books of the firm when a new partner is admitted without transferring the general reserve to the capital accounts:
1. Record the adjustment entry for the general reserve
General Reserve A/c Dr. 55,000
To X's Capital A/c 27,500
To Y's Capital A/c 27,500
Explanation: In this entry, the general reserve account is debited, and the capital accounts of the existing partners, X and Y, are credited in their old profit sharing ratio of 1:1. This entry ensures that the general reserve remains in the books of the firm and is not transferred to the capital accounts of the partners.
2. Record the entry for Z's capital contribution
Z's Capital A/c Dr. (amount of capital contributed)
To Bank A/c
Explanation: In this entry, Z's capital account is debited for the amount of capital contributed by him/her, and the bank account is credited.
3. Record the adjustment entry for the revaluation of assets and liabilities
Revaluation A/c Dr.
To X's Capital A/c (in the new ratio)
To Y's Capital A/c (in the new ratio)
To Z's Capital A/c (in the new ratio)
Explanation: In this entry, the revaluation account is debited, and the capital accounts of all the partners, X, Y, and Z, are credited in their new profit sharing ratio of 5:3:2. This entry is made to adjust the value of the assets and liabilities of the firm based on their fair market value and to bring them in line with the new profit sharing ratio.
In conclusion, the above journal entries need to be recorded in the books of the firm when a new partner is admitted without transferring the general reserve to the capital accounts. These entries ensure that the general reserve remains in the books of the firm and is not transferred to the capital accounts of the partners.
X and y are partners in a firm sharing profits in the ratio of 1:1.on ...
No adjustment entry will be passed because of x will not sacrifice and total general reserve transfer into y a/c
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