Q.A, B and C are partners sharing profits and losses in the ratio of 5 : 3 : 2. On 31.3.2019, 'A' retired. On the date of retirement, the books of the firm showed a reserve fund of ₹ 1,00,000. Pass journal entry to transfer the reserve fund.
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Start your 14-day free trial to unlock the full solution →Distribute the ₹1,00,000 reserve fund to A, B and C in the OLD ratio 5 : 3 : 2 (₹50,000 : ₹30,000 : ₹20,000) at the time of A's retirement.
Concept (TN HSC Class-12 Accountancy): A reserve fund is an accumulated past profit not yet given to the partners. It belongs to ALL partners, including the retiring partner, because it was earned while all of them were partners. On retirement it is therefore transferred to every partner's capital account in the OLD profit-sharing ratio.
Division of ₹1,00,000 in 5 : 3 : 2 (total 10 parts):
| Partner | Share | Amount (₹) |
|---|---|---|
| A | 5/10 | 50,000 |
| B | 3/10 | 30,000 |
| C | 2/10 | 20,000 |
| Total | 1,00,000 |
Journal entry:
| Date | Particulars | L.F. | Dr (₹) | Cr (₹) |
| --- | --- | --- | --- | --- | …
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