Adjustment of Accumulated Profit and Losses Video Lecture - Commerce

accumulated profits and losses this is
very similar in fact it is exactly the
same adjustment is exactly the same as
that we did in case of admission of a
partner what do we do
reserves account debit to all partners
capital accounts in their own profit
sharing ratio old ratio but sometimes
only the retiring partners capital
account is credited the remaining
reserves the firm wants to retain in the
balance sheet in that case we could pass
an entry Reserve's account debit to
retiring partners capital account with
lilius retiring partners share our
care should be taken to see that the
profit sharing ratio remains the same
between the remaining partners if that
is the same we can do this reserves
account debit to retiring partners
capital account take only his share and
credit the retiring but less capital
account let us take an example a B and C
they are equal partners and a retires
balance in the general reserve account
amounts to one lakh fifty thousand so
what are the entries that we could pass
the entries we would pass are one
general reserve account debit one like
fifty thousand 2a 2b and 2c
in their old profit sharing ratio 50
thousand 50 thousand and fifty thousand
this is one next since is retired and
nothing is mentioned about thee yet the
remaining partners it is as you
that BNC will continue to share profits
in the same ratio between them that is
equally in such a case we can also pass
the entry general reserve account debit
with only is share fifty thousand two is
capital fifty thousand so this was
alternative one and this is alternative
to this works because the profit sharing
ratio between the remaining partners is
the same before retirement and after
retirement yet another option would be
reserves account debit to all partners
in the old ratio and if reserve needs to
be maintained in the balance sheet then
remaining partners capital account debit
to reserves a B and C are equal partners
a retires B and C agree to a
profit-sharing ratio of two is two three
now the ratio has changed balance in the
reserve account amounts to one like
fifty thousand what would be the entry
for adjustment of general reserve
assuming general reserve is to be
retained in the balance sheet what would
we do then we could pass an entry right
of what is their general reserve account
debit to eight to be to see 1 lakh 50
thousand 50 thousand 50 thousand and
fifty thousand this is old ratio then
what do we do then we take the new ratio
what is the new ratio to H 2 3 so what
do we do we create the general reserve
well a has retired so B account debit C
account debit to general reserve we need
general reserve of 150 thousand one lakh
fifty thousand ratio is 2 by 3 therefore
it would become 6
three thousand and ninety thousand that
is 2 by 5 of 1 lakh 50 and 3 by 5 of 1
lakh 50 thousand this is the same thing
as crediting the retiring partners
account and debiting the remaining
partners capital accounts in their
sacrificing ratio the effect is the same
so you've done three methods of writing
off of the accumulated profits if there
were accumulated losses we would do the
same thing but retiring partners capital
account would be debited profit and loss
account debit balance would be credited
to close the account this also would be
done in the old profit sharing ratio of
all partners