Answer :
Certainly! Let's solve this problem step-by-step and provide the necessary journal entries.
### Step-by-Step Solution
#### 1. Initial Balances
The books have shown the following balances as of April 1, 2024:
- Profit & Loss (Cr) ₹ 240,000
- General Reserve ₹ 90,000
- Compensation Reserve ₹ 120,000
- Advertisement Suspense Account (Dr) ₹ 180,000
#### 2. Calculate Total Balances
To compute the total balances available for redistribution among the partners, we sum the provided balances. Note that the Advertisement Suspense Account is a debit balance and thus subtracted.
[tex]\[ \text{Total Balances} = \text{Credit Balances} - \text{Debit Balance} \][/tex]
[tex]\[ \text{Total Balances} = (240,000 + 90,000 + 120,000) - 180,000 = 270,000 \][/tex]
#### 3. Calculate Equal Shares
Since they decided to share profits and losses equally from the mentioned date, the total balance will be divided equally among [tex]\( x \)[/tex], [tex]\( y \)[/tex], and [tex]\( z \)[/tex].
[tex]\[ \text{Share for each partner} = \frac{\text{Total Balances}}{3} \][/tex]
[tex]\[ \text{Share for each partner} = \frac{270,000}{3} = 90,000 \][/tex]
Given these calculations:
- Each partner [tex]\( x \)[/tex], [tex]\( y \)[/tex], and [tex]\( z \)[/tex] will have a new share of ₹ 90,000.
### Journal Entries
We need to pass the necessary journal entries to adjust the balances according to the new profit-sharing arrangement.
#### a. Distribution of Reserves and Balances
The first step involves distributing the reserves and balances to the partner's capital accounts in the old profit-sharing ratio (4:3:2).
Journal Entry for Distribution:
[tex]\[ \begin{array}{|c|c|c|} \hline \text{Date} & \text{Particulars} & \text{Amount (₹)} \\ \hline \text{April 1, 2024} & \text{Profit \& Loss A/c} & 240,000 \\ \cline{2-3} & \text{To X's Capital A/c (4/9)} & 106,667 \\ \cline{2-3} & \text{To Y's Capital A/c (3/9)} & 80,000 \\ \cline{2-3} & \text{To Z's Capital A/c (2/9)} & 53,333 \\ \hline \text{April 1, 2024} & \text{General Reserve A/c} & 90,000 \\ \cline{2-3} & \text{To X's Capital A/c (4/9)} & 40,000 \\ \cline{2-3} & \text{To Y's Capital A/c (3/9)} & 30,000 \\ \cline{2-3} & \text{To Z's Capital A/c (2/9)} & 20,000 \\ \hline \text{April 1, 2024} & \text{Compensation Reserve A/c} & 120,000 \\ \cline{2-3} & \text{To X's Capital A/c (4/9)} & 53,333 \\ \cline{2-3} & \text{To Y's Capital A/c (3/9)} & 40,000 \\ \cline{2-3} & \text{To Z's Capital A/c (2/9)} & 26,667 \\ \hline \text{April 1, 2024} & \text{X's Capital A/c (4/9)} & 80,000 \\ \cline{2-3} & \text{To Advertisement Suspense A/c} & 80,000 \\ \hline \text{April 1, 2024} & \text{Y's Capital A/c (3/9)} & 60,000 \\ \cline{2-3} & \text{To Advertisement Suspense A/c} & 60,000 \\ \hline \text{April 1, 2024} & \text{Z's Capital A/c (2/9)} & 40,000 \\ \cline{2-3} & \text{To Advertisement Suspense A/c} & 40,000 \\ \hline \end{array} \][/tex]
#### b. Adjusting Capital Accounts to Equal Shares
Journal Entry for Adjusting Capital Accounts (if required):
[tex]\[ \begin{array}{|c|c|c|} \hline \text{No further adjustments needed as calculated distributions naturally balance to the equal share of ₹90,000 each.} \\ \hline \end{array} \][/tex]
### Conclusion
By passing these journal entries, we have redistributed the balances according to the new equal profit-sharing ratio and adjusted the partners' capital accounts accordingly. Now all partners have an equal share of ₹ 90,000 each.
### Step-by-Step Solution
#### 1. Initial Balances
The books have shown the following balances as of April 1, 2024:
- Profit & Loss (Cr) ₹ 240,000
- General Reserve ₹ 90,000
- Compensation Reserve ₹ 120,000
- Advertisement Suspense Account (Dr) ₹ 180,000
#### 2. Calculate Total Balances
To compute the total balances available for redistribution among the partners, we sum the provided balances. Note that the Advertisement Suspense Account is a debit balance and thus subtracted.
[tex]\[ \text{Total Balances} = \text{Credit Balances} - \text{Debit Balance} \][/tex]
[tex]\[ \text{Total Balances} = (240,000 + 90,000 + 120,000) - 180,000 = 270,000 \][/tex]
#### 3. Calculate Equal Shares
Since they decided to share profits and losses equally from the mentioned date, the total balance will be divided equally among [tex]\( x \)[/tex], [tex]\( y \)[/tex], and [tex]\( z \)[/tex].
[tex]\[ \text{Share for each partner} = \frac{\text{Total Balances}}{3} \][/tex]
[tex]\[ \text{Share for each partner} = \frac{270,000}{3} = 90,000 \][/tex]
Given these calculations:
- Each partner [tex]\( x \)[/tex], [tex]\( y \)[/tex], and [tex]\( z \)[/tex] will have a new share of ₹ 90,000.
### Journal Entries
We need to pass the necessary journal entries to adjust the balances according to the new profit-sharing arrangement.
#### a. Distribution of Reserves and Balances
The first step involves distributing the reserves and balances to the partner's capital accounts in the old profit-sharing ratio (4:3:2).
Journal Entry for Distribution:
[tex]\[ \begin{array}{|c|c|c|} \hline \text{Date} & \text{Particulars} & \text{Amount (₹)} \\ \hline \text{April 1, 2024} & \text{Profit \& Loss A/c} & 240,000 \\ \cline{2-3} & \text{To X's Capital A/c (4/9)} & 106,667 \\ \cline{2-3} & \text{To Y's Capital A/c (3/9)} & 80,000 \\ \cline{2-3} & \text{To Z's Capital A/c (2/9)} & 53,333 \\ \hline \text{April 1, 2024} & \text{General Reserve A/c} & 90,000 \\ \cline{2-3} & \text{To X's Capital A/c (4/9)} & 40,000 \\ \cline{2-3} & \text{To Y's Capital A/c (3/9)} & 30,000 \\ \cline{2-3} & \text{To Z's Capital A/c (2/9)} & 20,000 \\ \hline \text{April 1, 2024} & \text{Compensation Reserve A/c} & 120,000 \\ \cline{2-3} & \text{To X's Capital A/c (4/9)} & 53,333 \\ \cline{2-3} & \text{To Y's Capital A/c (3/9)} & 40,000 \\ \cline{2-3} & \text{To Z's Capital A/c (2/9)} & 26,667 \\ \hline \text{April 1, 2024} & \text{X's Capital A/c (4/9)} & 80,000 \\ \cline{2-3} & \text{To Advertisement Suspense A/c} & 80,000 \\ \hline \text{April 1, 2024} & \text{Y's Capital A/c (3/9)} & 60,000 \\ \cline{2-3} & \text{To Advertisement Suspense A/c} & 60,000 \\ \hline \text{April 1, 2024} & \text{Z's Capital A/c (2/9)} & 40,000 \\ \cline{2-3} & \text{To Advertisement Suspense A/c} & 40,000 \\ \hline \end{array} \][/tex]
#### b. Adjusting Capital Accounts to Equal Shares
Journal Entry for Adjusting Capital Accounts (if required):
[tex]\[ \begin{array}{|c|c|c|} \hline \text{No further adjustments needed as calculated distributions naturally balance to the equal share of ₹90,000 each.} \\ \hline \end{array} \][/tex]
### Conclusion
By passing these journal entries, we have redistributed the balances according to the new equal profit-sharing ratio and adjusted the partners' capital accounts accordingly. Now all partners have an equal share of ₹ 90,000 each.
