P, Q and R are partners in a firm sharing profits in the ratio of 2 : 2 : 1. On March 31, 2024, their Balance Sheet showed a general reserve of ₹ 3,00,000. On that date they decided to share future profits equally
P, Q and R are partners in a firm sharing profits in the ratio of 2 : 2 : 1. On March 31, 2024, their Balance Sheet showed a general reserve of ₹ 3,00,000. On that date they decided to share future profits equally. Record the necessary journal entry in the books of the firm under the following circumstances:
(i) When they want to transfer the general reserve in their capital accounts.
(ii) When they don’t want to transfer general reserve in their capital accounts and prefer to record an adjustment entry for the same.
[Ans. (i) General Reserve will be credited to Partner’s Capital Accounts in old ratio.
(ii) Debit R by ₹ 40,000 and Credit P and Q by ₹ 20,000 each.
Anurag Pathak Answered question August 1, 2024
Solution:-
In the absence of any information and if partners want to distribute the general reserve, it is credited to partners in the old profit sharing ratio.
Anurag Pathak Answered question August 1, 2024
