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Plant and Machinery 3,20,000 Stock 2,60,000 Creditors 84,000 A provision of 5% was required on debtors. Goodwill of the firm is valued at Rs. 1,70,000. Partners agreed that from 1.1.2003 they will share profits in the ratio of 4:3:2:1 instead of their former ratio of 5:4:2:1. They do not want to record the goodwill and revised values of assets and liabilities in the books. They also do not want to disturb the reserves. Pass a single journal entry to give effect to the above.?
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Plant and Machinery 3,20,000 Stock 2,60,000 Creditors 84,000 A provisi...
Journal Entry to Give Effect to the Changes in Profit Sharing Ratio and Valuation of Goodwill
Explanation:
To give effect to the changes in profit sharing ratio and valuation of goodwill, a single journal entry needs to be passed. This journal entry will adjust the capital accounts of the partners and reflect the revised profit sharing ratio.
Step 1: Calculate the Revised Capital Balances
First, we need to calculate the revised capital balances of the partners based on the new profit sharing ratio. The old profit sharing ratio was 5:4:2:1, and the new ratio is 4:3:2:1.
Partner A:
Old Share: 5/12 × Total Capital = 5/12 × (Total Assets - Total Liabilities)
New Share: 4/10 × Total Capital = 4/10 × (Total Assets - Total Liabilities)
Partner B:
Old Share: 4/12 × Total Capital = 4/12 × (Total Assets - Total Liabilities)
New Share: 3/10 × Total Capital = 3/10 × (Total Assets - Total Liabilities)
Partner C:
Old Share: 2/12 × Total Capital = 2/12 × (Total Assets - Total Liabilities)
New Share: 2/10 × Total Capital = 2/10 × (Total Assets - Total Liabilities)
Partner D:
Old Share: 1/12 × Total Capital = 1/12 × (Total Assets - Total Liabilities)
New Share: 1/10 × Total Capital = 1/10 × (Total Assets - Total Liabilities)
Step 2: Calculate the Adjusted Capital Balances
Next, we need to calculate the adjustments required for each partner's capital balance based on the difference between their old and new shares.
Partner A:
Adjusted Capital: New Share - Old Share
Partner B:
Adjusted Capital: New Share - Old Share
Partner C:
Adjusted Capital: New Share - Old Share
Partner D:
Adjusted Capital: New Share - Old Share
Step 3: Pass the Journal Entry
Finally, we can pass the journal entry to adjust the capital accounts of the partners.
Journal Entry:
Partner A's Capital A/c Dr.
Partner B's Capital A/c Dr.
Partner C's Capital A/c Dr.
To Partner D's Capital A/c
Explanation of the Journal Entry:
- The capital accounts of partners A, B, and C are debited because their capital balances are decreasing due to the revised profit sharing ratio.
- Partner D's capital account is credited because their capital balance is increasing due to the revised profit sharing ratio.
Effects of the Journal Entry:
- The journal entry adjusts the capital accounts of the partners to reflect the revised profit sharing ratio.
- The goodwill is not recorded in the books, as per the partners' agreement.
- The revised values of assets and liabilities are not recorded in the books, as per the partners' agreement.
- The reserves are not disturbed, as per the partners' agreement.
This single journal entry ensures that the changes in profit sharing ratio and valuation of goodwill are properly accounted for without disturbing the existing reserves
Explanation:
To give effect to the changes in profit sharing ratio and valuation of goodwill, a single journal entry needs to be passed. This journal entry will adjust the capital accounts of the partners and reflect the revised profit sharing ratio.
Step 1: Calculate the Revised Capital Balances
First, we need to calculate the revised capital balances of the partners based on the new profit sharing ratio. The old profit sharing ratio was 5:4:2:1, and the new ratio is 4:3:2:1.
Partner A:
Old Share: 5/12 × Total Capital = 5/12 × (Total Assets - Total Liabilities)
New Share: 4/10 × Total Capital = 4/10 × (Total Assets - Total Liabilities)
Partner B:
Old Share: 4/12 × Total Capital = 4/12 × (Total Assets - Total Liabilities)
New Share: 3/10 × Total Capital = 3/10 × (Total Assets - Total Liabilities)
Partner C:
Old Share: 2/12 × Total Capital = 2/12 × (Total Assets - Total Liabilities)
New Share: 2/10 × Total Capital = 2/10 × (Total Assets - Total Liabilities)
Partner D:
Old Share: 1/12 × Total Capital = 1/12 × (Total Assets - Total Liabilities)
New Share: 1/10 × Total Capital = 1/10 × (Total Assets - Total Liabilities)
Step 2: Calculate the Adjusted Capital Balances
Next, we need to calculate the adjustments required for each partner's capital balance based on the difference between their old and new shares.
Partner A:
Adjusted Capital: New Share - Old Share
Partner B:
Adjusted Capital: New Share - Old Share
Partner C:
Adjusted Capital: New Share - Old Share
Partner D:
Adjusted Capital: New Share - Old Share
Step 3: Pass the Journal Entry
Finally, we can pass the journal entry to adjust the capital accounts of the partners.
Journal Entry:
Partner A's Capital A/c Dr.
Partner B's Capital A/c Dr.
Partner C's Capital A/c Dr.
To Partner D's Capital A/c
Explanation of the Journal Entry:
- The capital accounts of partners A, B, and C are debited because their capital balances are decreasing due to the revised profit sharing ratio.
- Partner D's capital account is credited because their capital balance is increasing due to the revised profit sharing ratio.
Effects of the Journal Entry:
- The journal entry adjusts the capital accounts of the partners to reflect the revised profit sharing ratio.
- The goodwill is not recorded in the books, as per the partners' agreement.
- The revised values of assets and liabilities are not recorded in the books, as per the partners' agreement.
- The reserves are not disturbed, as per the partners' agreement.
This single journal entry ensures that the changes in profit sharing ratio and valuation of goodwill are properly accounted for without disturbing the existing reserves
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Plant and Machinery 3,20,000 Stock 2,60,000 Creditors 84,000 A provision of 5% was required on debtors. Goodwill of the firm is valued at Rs. 1,70,000. Partners agreed that from 1.1.2003 they will share profits in the ratio of 4:3:2:1 instead of their former ratio of 5:4:2:1. They do not want to record the goodwill and revised values of assets and liabilities in the books. They also do not want to disturb the reserves. Pass a single journal entry to give effect to the above.?
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Plant and Machinery 3,20,000 Stock 2,60,000 Creditors 84,000 A provision of 5% was required on debtors. Goodwill of the firm is valued at Rs. 1,70,000. Partners agreed that from 1.1.2003 they will share profits in the ratio of 4:3:2:1 instead of their former ratio of 5:4:2:1. They do not want to record the goodwill and revised values of assets and liabilities in the books. They also do not want to disturb the reserves. Pass a single journal entry to give effect to the above.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Plant and Machinery 3,20,000 Stock 2,60,000 Creditors 84,000 A provision of 5% was required on debtors. Goodwill of the firm is valued at Rs. 1,70,000. Partners agreed that from 1.1.2003 they will share profits in the ratio of 4:3:2:1 instead of their former ratio of 5:4:2:1. They do not want to record the goodwill and revised values of assets and liabilities in the books. They also do not want to disturb the reserves. Pass a single journal entry to give effect to the above.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Plant and Machinery 3,20,000 Stock 2,60,000 Creditors 84,000 A provision of 5% was required on debtors. Goodwill of the firm is valued at Rs. 1,70,000. Partners agreed that from 1.1.2003 they will share profits in the ratio of 4:3:2:1 instead of their former ratio of 5:4:2:1. They do not want to record the goodwill and revised values of assets and liabilities in the books. They also do not want to disturb the reserves. Pass a single journal entry to give effect to the above.?.
Plant and Machinery 3,20,000 Stock 2,60,000 Creditors 84,000 A provision of 5% was required on debtors. Goodwill of the firm is valued at Rs. 1,70,000. Partners agreed that from 1.1.2003 they will share profits in the ratio of 4:3:2:1 instead of their former ratio of 5:4:2:1. They do not want to record the goodwill and revised values of assets and liabilities in the books. They also do not want to disturb the reserves. Pass a single journal entry to give effect to the above.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Plant and Machinery 3,20,000 Stock 2,60,000 Creditors 84,000 A provision of 5% was required on debtors. Goodwill of the firm is valued at Rs. 1,70,000. Partners agreed that from 1.1.2003 they will share profits in the ratio of 4:3:2:1 instead of their former ratio of 5:4:2:1. They do not want to record the goodwill and revised values of assets and liabilities in the books. They also do not want to disturb the reserves. Pass a single journal entry to give effect to the above.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Plant and Machinery 3,20,000 Stock 2,60,000 Creditors 84,000 A provision of 5% was required on debtors. Goodwill of the firm is valued at Rs. 1,70,000. Partners agreed that from 1.1.2003 they will share profits in the ratio of 4:3:2:1 instead of their former ratio of 5:4:2:1. They do not want to record the goodwill and revised values of assets and liabilities in the books. They also do not want to disturb the reserves. Pass a single journal entry to give effect to the above.?.
Solutions for Plant and Machinery 3,20,000 Stock 2,60,000 Creditors 84,000 A provision of 5% was required on debtors. Goodwill of the firm is valued at Rs. 1,70,000. Partners agreed that from 1.1.2003 they will share profits in the ratio of 4:3:2:1 instead of their former ratio of 5:4:2:1. They do not want to record the goodwill and revised values of assets and liabilities in the books. They also do not want to disturb the reserves. Pass a single journal entry to give effect to the above.? in English & in Hindi are available as part of our courses for Commerce.
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Plant and Machinery 3,20,000 Stock 2,60,000 Creditors 84,000 A provision of 5% was required on debtors. Goodwill of the firm is valued at Rs. 1,70,000. Partners agreed that from 1.1.2003 they will share profits in the ratio of 4:3:2:1 instead of their former ratio of 5:4:2:1. They do not want to record the goodwill and revised values of assets and liabilities in the books. They also do not want to disturb the reserves. Pass a single journal entry to give effect to the above.?, a detailed solution for Plant and Machinery 3,20,000 Stock 2,60,000 Creditors 84,000 A provision of 5% was required on debtors. Goodwill of the firm is valued at Rs. 1,70,000. Partners agreed that from 1.1.2003 they will share profits in the ratio of 4:3:2:1 instead of their former ratio of 5:4:2:1. They do not want to record the goodwill and revised values of assets and liabilities in the books. They also do not want to disturb the reserves. Pass a single journal entry to give effect to the above.? has been provided alongside types of Plant and Machinery 3,20,000 Stock 2,60,000 Creditors 84,000 A provision of 5% was required on debtors. Goodwill of the firm is valued at Rs. 1,70,000. Partners agreed that from 1.1.2003 they will share profits in the ratio of 4:3:2:1 instead of their former ratio of 5:4:2:1. They do not want to record the goodwill and revised values of assets and liabilities in the books. They also do not want to disturb the reserves. Pass a single journal entry to give effect to the above.? theory, EduRev gives you an
ample number of questions to practice Plant and Machinery 3,20,000 Stock 2,60,000 Creditors 84,000 A provision of 5% was required on debtors. Goodwill of the firm is valued at Rs. 1,70,000. Partners agreed that from 1.1.2003 they will share profits in the ratio of 4:3:2:1 instead of their former ratio of 5:4:2:1. They do not want to record the goodwill and revised values of assets and liabilities in the books. They also do not want to disturb the reserves. Pass a single journal entry to give effect to the above.? tests, examples and also practice Commerce tests.
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