Q.A and B share profits and losses in the ratio 2:1. Before admitting C into partnership, their Balance Sheet showed a General Reserve of ₹30,000 and a credit balance of ₹15,000 in the Profit and Loss Account. Pass journal entries to close these accounts by transferring them to A's and B's Capital Accounts in their old profit-sharing ratio.
You're viewing a preview — the full solution, concept, methods & PYQ mapping are locked.
Start your 14-day free trial to unlock the full solution →Both the General Reserve and the credit balance of the Profit and Loss Account represent profits earned by the firm in years BEFORE C's admission, and so belong entirely to the old partners, A and B, in their old ratio of 2:1.
Entry 1 — Closing the General Reserve:
A's share = ₹30,000 × 2/3 = ₹20,000. B's share = ₹30,000 × 1/3 = ₹10,000. (Check: ₹20,000 + ₹10,000 = ₹30,000.)
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| General Reserve A/c ...Dr | 30,000 | |
| To A's Capital A/c | 20,000 | |
| To B's Capital A/c | 10,000 |
(Being General Reserve transferred to old partners' capital accounts in their old ratio, 2:1)
Entry 2 — Closing the Profit and Loss Account (credit balance):
A's share = ₹15,000 × 2/3 = ₹10,000. B's share = ₹15,000 × 1/3 = ₹5,000. (Check: ₹10,000 + ₹5,000 = ₹15,000.)
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Profit and Loss A/c ...Dr | 15,000 | |
| To A's Capital A/c | 10,000 | |
| To B's Capital A/c | 5,000 |
(Being credit balance of Profit and Loss A/c transferred to old partners' capital accounts in their old ratio, 2:1) …
Unlock everything free for 14 days
- Full step-by-step solutions
- Concept-first explanations
- Methods, shortcuts & mistakes
- PYQ mapping + timed mock tests
Full access for 14 days. No credit card required.