Nitya and Anand are partners in a firm sharing profits and losses equally. With effect from 1st April 2023, they decided to share future profits in the ratio of 3 : 2. On the date of the change in the profit sharing ratio, the Profit & Loss Account had a credit balance of ₹ 1,50,000. Pass the necessary Journal entry for the distribution of the balance in the Profit & Loss Account before the change in the profit-sharing ratio.

Nitya and Anand are partners in a firm sharing profits and losses equally.

With effect from 1st April 2023, they decided to share future profits in the ratio of 3 : 2.

On the date of the change in the profit sharing ratio, the Profit & Loss Account had a credit balance of ₹ 1,50,000.

Pass the necessary Journal entry for the distribution of the balance in the Profit & Loss Account before the change in the profit-sharing ratio.

[Ans.: Dr. Profit & Los A/c by ₹ 1,50,000; Cr. Nitya’s Capital A/c by ₹ 75,000 and Anand’s Capital A/c by ₹ 75,000.]