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Sachin, Agarkar and Ankola are equal partners in a firm. Agarkar retired and the continuing partners decide to share profits of the new firm in the ratio of 5 : 4. An extract of Balance Sheet of the firm before the retirement of Agarkar, on 1st April, 2023 is given below:

Liabilities Assets

General Reserve

Contingency Reserve

Profit & Loss A/c

Investment Fluctuation Reserve

Workmen Compensation Reserve

50,000

5,000

30,000

15,000

12,000

Investment (Market Value ₹ 1,90,000)

Advertisement Expenditure (Deferred Revenue)

2,00,000

10,000

       

A claim on account of Workmen’s Compensation is estimated at ₹ 2,000 only, which is adjusted through Workmen Compensation Reserve. Investment Fluctuation Reserve will also be adjusted as required.

Continuing partners (Sachin and Ankola) decide to record the effect of the above-accumulated profits, losses and reserves (after adjustments) without affecting their book values by passing an adjustment entry.

Anurag Pathak Changed status to publish March 3, 2024
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