P, Q and R are partners sharing profits and losses in the ratio of 5 : 3 : 2. From 1st April, 2024, they decide to share profits and losses in equal proportions

P, Q and R are partners sharing profits and losses in the ratio of 5 : 3 : 2. From 1st April, 2024, they decide to share profits and losses in equal proportions. The partnership deed provides that in the event of any change in profit sharing ratio, the goodwill should be valued at three year’s purchase of the average of five year’s profits. The profits and losses of the preceding five years ending 31st March are :

Profits : 2020 : ₹ 60,000, 2021 : ₹ 1,50,000, 2022 : ₹ 1,70,000, 2023 : ₹ 1,90,000. Loss : 2024 : ₹ 70,000.

Give the necessary journal entry to record the above change.

[Ans. Debit Q by ₹ 10,000 and R by ₹ 40,000 and Credit P by ₹ 50,000.]