DELHI PUBLIC SCHOOL, DAULATPUR

SUBJECT – Accountancy
CHAPTER – Change in Profit Sharing Ratio among Existing
Partners
Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason
(R). Mark the correct choice as:
(a) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion
(A).
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of
Assertion (A).
(c) Assertion (A) is true, but Reason (R) is false.
(d) Assertion (A) is false, but Reason (R) is true.
1. Assertion (A): At the time of change in profit sharing ratio, it is important to determine the sacrificing
ratio and gaining ratio of partners.
Reason (R): The gaining partners compensate the sacrificing partners by paying them an appropriate
amount of goodwill.
2. Assertion (A): Change in profit sharing ratio does not change the relationship among the existing
partners.
Reason (R): Change in profit sharing ratio leads to dissolution of partnership.
3. Assertion (A): Any reserves or accumulated profits/losses appearing in the balance sheet should be transferred
to the partner’s capital accounts in an old ratio.
Reason (R): Accumulated profits/losses appear in the balance sheet after a change in profit-sharing ratio.
4. Sacrificing ratio is computed as ____________ – ____________.
5. Gaining ratio is computed as ____________ – ____________.
6. When Goodwill is not purchased goodwill account can:
(a) Never be raised in the books
(b) Be raised in the books
(c) Be partially raised in the books
(d) Be raised as per the agreement of the partners
7. P and Q were partners sharing profits and losses in the ratio of 3 : 2. They decided that with effect from
1st January, 2019 they would share profits and losses in the ratio of 5 : 3. Goodwill is valued at ? 1,28,000.
In adjustment entry:
(a) Cr. P by ₹3,200; Dr. Q by ₹3,200
(b) Cr. P by ₹37,000; Dr. Q by ₹37,000
(c) Dr. P by ₹37,000; Cr. Q by ₹37,000
(d) Dr. P by ₹3,200 Cr. Q by ₹3,200
8. A and B share profits and losses in the ratio of 3 : 2. With effect from 1 st January, 2019, they agreed to
share profits equally. Sacrificing ratio and Gaining Ratio will be ____________________
9. A and B were partners in a firm sharing profit or loss in the ratio of 3 : 1. With effect from Jan. 1, 2019
they agreed to share profit or loss in the ratio of 2 : 1. Due to change in profit-loss sharing ratio, B’s gain
or sacrifice will be :
(a) Gain ½ (b) Sacrifice ½ (c) Gain ⅓ (d) Sacrifice ⅓
10. Capital employed by a partnership firm is Rs. 5,00,000. Its average profit is Rs. 60,000. The normal rate
of return in similar type of business is 10%. What is the amount of super profits?
(a) Rs. 50,000 (b) Rs. 10,000 (c) Rs. 6,000 (d) Rs. 56,000
11. A, B and C are partners in a firm. They wanted to change their profit sharing ratio into 4 : 3 : 2. The
goodwill was valued at 90,000. The adjusting journal entry will be:
(a) Dr. A’s Capital A/c and Cr. C’s Capital A/c by 10,000
(b) Dr. B’s Capital A/c and Cr. A’s Capital A/c by 10,000
 (c) Dr. C’s Capital A/c and Cr. A’s Capital A/c by 10,000
(d) Dr. C’s Capital A/c and Cr. B’s Capital A/c by 10,000
12. A, B and C are partners in a firm sharing profits in the ratio of 3 : 4 : 1. They decided to share profits
equally w.e.f. 1 st April, 2019. On that date the Profit and Loss Account showed the credit balance of Rs.
96,000. Instead of closing the Profit and Loss Account, it was decided to record an adjustment entry
reflecting the change in profit sharing ratio. In the journal entry:
(a) Dr. A by ₹4,000; Dr. B by ₹16,000; Cr. C by ₹20,000
(b) Cr. A by ₹4,000; Cr. B by ₹16,000; Dr. C by ₹20,000
(c) Cr. A by ₹16,000; Cr. B by ₹4,000; Dr. C by ₹20,000
(d) Dr. A by ₹16,000; Dr. B by ₹4,000; Cr. C by ₹20,000
13. A, B, C, D and E are in partnership sharing profits and losses equally. They mutually agree to change the
profit sharing ratio to 5 : 4 : 3 : 2 : 1. In this process, E losses:

14. Out of the following, which is not a reconstitution of a firm?

(a) Admission of a partner (c) Retirement of a partner
(b) Death of a partner (d) Dissolution of a partnership firm
15. A, B and C are partners sharing profits in the ratio 3 : 2 : 1. They decided to share future profits equally.
Workmen Compensation Reserve appear in the balance sheet at Rs. 30,000 which will be distributed
among the partners in _____________.
16. Anant, Gulab and Khushbu were partners in a firm sharing profits in the ratio of 5 : 3 : 2. From 1.4.2014,
they decided to share the profits equally. For this purpose the goodwill of the firm was valued at Rs.
2,40,000. Pass necessary journal entry for the treatment of goodwill on change in the profit-sharing ratio
of Anant, Gulab and Khushbu.
17. Anita, Asha and Amrit are partners sharing profits in the ratio of 3 : 2 : 1 respectively. From 1st April,
2018, they decided to share profits in the ratio of 1 : 3 : 2. The partnership deed provides that in the event
of any change in profit sharing ratio, the goodwill should be valued at three years purchase of the average
of five years profits. The profits and losses of the preceding five years are:
2013-14 1,20,000 2014-15 3,00,000 2015-16 3,40,000
2016-17 3,80,000 2017-18 1,40,000 (Loss).
Showing the working clearly, give the necessary journal entry to record the above change.
18. Neha, Niharika, and Nitin are partners sharing profits and losses in the ratio of 2:3:4. They decided to
change their ratio and their new ratio is 4:3:2. They also decided to pass a single journal entry to adjust
the following without affecting their book values.
19. Keshav, Meenakshi and Mohit sharing profit and losses in the ratio of 1:2:2, decide to share future profit
equally with effect from April 1, 2015. On that date general reserve showed a balance of Rs. 40,000.
Partners do not want to distribute the reserves. You are required to give the adjusting entry.
20. A, B and C are partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1 and from today onwards,
they decided to share future profits and losses equally. What single journal entry shall be passed for
following items:
(a) General Reserve appearing in the balance sheet at Rs. 60,000
(b) Goodwill is valued at Rs. 30,000
(c) Revaluation of assets and liabilities show a profit of Rs. 30,000
21. Geeta, Sita and Rita are partners in a firm sharing profits in the ratio of 3:2:1. On March 31, 2018, they
decided to share profits equally. On that date the book of the firm shows following balances:
a) General reserve Rs. 30,000
b) Profit and Loss account Rs. 10,000 (Dr.)
c) Workmen compensation fund Rs. 10,000
Record necessary journal entries in the books of the firm under the following circumstances:
i.When they want to transfer the reserve and other profit and loss in their capital accounts.
ii.When they don’t want to transfer the reserves and other profit and losses in their capital accounts
but prefer to record an adjustment entry for the same.
22. A and B are partners in firm sharing profits and losses in the ratio of 3:2. They admit C into partnership
for 1/5th share. C brings in Rs. 30,000 as capital and Rs.10,000 as goodwill. At the time of admission of C,
goodwill appears in the Balance Sheet of A and B at Rs. 3,000. The new profit-sharing ratio of the partners will
be 5:3:2. Pass necessary Journal entries.
23. X and Y are partners in a firm sharing profits and losses in the ratio 3:2. On 1stApril,2018, they admit Z as a
new partner for 1/5th share in profits. On that date, there was a balance of Rs.1,50,000 in General Reserve and
a debit balance of Rs. 20,000 in the Profit and Loss Account of the firm. Pass necessary Journal entries
regarding adjustment of reserve and accumulated of reserve and accumulated profit/loss.
24. Piyush, Puja and Praveen are partners sharing profits and losses in the ratio of 3:3:2. Their balance sheet as on
March 31st 2015 was as follows:
Liabilities (Rs.) Assets (Rs.)

Sundry creditors Cash at bank 74,000

48,000
Bank Loan Sundry debtors 88,000
72,000
Capital: Stock 2,40,000
10,00,000
Piyush 4,00,000 Machinery 3,18,000
Puja 3,00,000 Building 4,00,000
Praveen 3,00,000 11,20,000 11,20,000
Partners decided that with effect from April 1, 2015, they would share profits and losses in the ratio of 4:3:2. It
was agreed that:
(a) Stock be valued at Rs. 2,20,000.
(b) Machinery is to be depreciated by 10%
(c) A provision for doubtful debts is to be made on debtors at 5%.
(d) Building is to be appreciated by 20%
(e) A liability for Rs. 5,000 included in sundry creditors is not likely to arise. Partners agreed that the
revised value are to be recorded in the books.
You are required to prepare journal, revaluation account, partner’s capital Accounts and revised Balance
Sheet.
25. X and Y were partners in a firm sharing profits and losses in the ratio of 3:2. Their Balance Sheet as at 31st
March, 2017 was as follows:

Liabilities Amount Assets Amount

Creditors 42,000 Current Assets 2,00,000
Employee’s Provident Fund 20,000 Investment 50,000
Contingency Reserve 30,000 Furniture 20,000
Profit & Loss Account 45,000 Machinery 90,000
Workmen Compensation 18,000 Advertisement Expenditure 20,000
Reserve 25,000 (Deferred Revenue Expenditure)
Investment Fluctuation
Reserve 2,00,000
Capitals: X 1,20,000
Y 80,000
3,80,000 3,80,000

They admit Z into partnership on 1st April, 2017 and the new profit sharing ratio is agreed at 2 : 1 : 1. It is
estimated that:
(a) Claim on account of Workmen's Compensation is estimated at Rs 10,000.
(b) Market value of Investments is Rs. 46,000.
Give necessary journal entries to adjust accumulated profits and losses.