# TS Grewal Solution Class 12 Chapter 4 Change in Profit Sharing Ratio Among the Existing Partners

Read TS Grewal Accountancy Class 12 Solution Chapter 4 Change in Profit Sharing Ratio Among the Existing Partners 2023 2024. Students should study TS Grewal Solutions Class 12 Accountancy available on Studiestoday.com with solved questions and answers. These chapter-wise answers for Class 12 Accountancy have been prepared by expert teachers of Grade 12. These TS Grewal Class 12 Solutions have been designed as per the latest accountancy TS Grewal Book for Class 12 and if practiced thoroughly can help you to score good marks in standard 12 Accounts class tests and examinations.

## Class 12 Accounts Chapter 4 Change in Profit Sharing Ratio Among the Existing Partners TS Grewal Solutions

TS Grewal Solutions for Chapter 4 Change in Profit Sharing Ratio Among the Existing Partners Class 12 Accounts have been provided below based on the latest TS Grewal Class 12 book. The answers have been prepared based on the latest 2023 2024 book for the current academic year. TS Grewal Solutions Class 12 will help students to improve their concepts and easily solve accountancy questions for Class 12. Class 12 Grewal solutions should be revised regularly as more practice will help you get a better rank and easily solve more questions.

### Chapter 4 Change in Profit Sharing Ratio Among the Existing Partners TS Grewal Class 12 Solutions

About this chapter: The TS Grewal Class 12 Chapter 4 on Change in Profit Sharing Ratio among partners is an important topic for class 12 students. Concepts relating to a partnership firm's profit-sharing ratio and how it can be changed have been explained in this chapter. There is a detailed explanation relating to the concept of a partnership firm and its importance. It also explains the concept relating to the profit sharing ratio and its significance in the partnership business. The chapter further details the conditions under which the profit-sharing ratio can be changed among the existing partners. It explains the different scenarios of impact on profit sharing ratio due to admission of a new partner, retirement of a partner, and death of a partner. Each of these topics has been explained in detail along with a lot of questions which the students can practice which will help them to get more marks in Class 12 board examinations. There are a lot of solved and unsolved questions also in the chapter. Our Class 12 Accountancy teachers have provided step-by-step solutions for all questions given in this chapter. TS Grewal Class 12 Chapter 4 is an important topic for all students as it will help them to understand the complexities of partnership firms' profit-sharing ratios.

Solutions for T.S. Grewal's Double Entry Book Keeping:
Accounting for Not for Profit Organizations and Partnership Firms (Vol.1)
Textbook for CBSE Class 12
TS Grewal Solutions Class 12 Accountancy
Chapter 4
Change in Profit Sharing Ratio among the Existing Partners

Question 1. What is meant by Reconstitution of a Partnership Firm?
Reconstitution of a partnership firm means change in relationship among partners For example,change in profit sharing ratio of retirement of a partner.

Question 2. State any two occasions on which a firm can be reconstituted.
A firm is reconstituted, whenever there is a:
1.) Change in the profit-sharing ratio among the existing partners.
2.) Admission of a new partner.

Question 3. Why the value of goodwill is determined when a firm is reconstituted?
The value of goodwill is determined when a firm is reconstituted because before reconstitution goodwill is self-generated. So, to start a new partnership that goodwill should be determined and
distributed among the partnership in their gaining or sacrificing ratio.

Question 4. Change in profit-sharing ratio amounts to dissolution of partnership or partnership Firm. Give reason in support of your answer.
Change in profit-sharing ratio amounts to dissolution of partnership and not dissolution of firm as the existing agreement comes to an end the firm continues under new agreement.

Question 5. Does the change in profit-sharing ratio into dissolution of the partnership firm? Give reason in support of your answer.
Change in profit-sharing ratio amounts to dissolution of partnership and not dissolution of firm as the existing agreement comes to an end the firm continues under new agreement.

Question 6. Explain the Revaluation Account.
Assets are revalued and the liabilities are reassessed at the time of change in profit sharing ratio and the gain (profit) or loss arising from it is credited or debited to Partners’ Capital Accounts in their old profit sharing ratio. The reason for revaluation of assets and reassessment of liabilities is that any increase or decrease in the value of asset and liabilities up to the date of change in profit sharing ratio is for the period before the change in profit sharing ratio.

Question 7. Do you distribute Reserves at the time of Reconstitution of a firm? Why?
Reserves and surplus are distributed at the time of reconstitution of partnership because if not distributed the new partner may claim his share from these immediately after his admission while these were created by old partners from their profits.

Question 8. Why is revaluation of assets on reconstitution of partnership necessary?
At the time of admission of a new partner, it is very necessary to revalue the assets and liabilities of a partnership firm for ascertaining its fair values. This is done because the value of assets and liabilities may have increased or decreased and consequently their corresponding figures in the old balance sheet may either be understated or overstated. Moreover, it may also be possible that some of the assets and liabilities are left unrecorded. Thus, in order to record the increase and decrease in the market value of the assets and liabilities, Revaluation Account is prepared and any profits or losses associated with this increase or decrease are distributed among the old partners of the firm.

Question 9. State the ratio in which the partners share accumulated profit when there is a change in the profit sharing ratio among existing partners.
Partners share gain (profit) or loss on revolution of assets and liabilities in their old profit sharing ratio/existing profit sharing ratio

EXERCISE ::--->

Question 1:  A and B are sharing profits and losses equally. With effect from 1st April, 2018, they agree to share profits in the ratio of 4 :3. Calculate individual partner's gain or sacrifice due to the change in ration.
Old Ratio A and B = 1 : 1
New Ratio A and B = 4 : 3
Sacrificing Ratio = Old Ratio − New Ratio
A’s Sacrifice = 1/2 - 4/7 = (7-8)/14 = -  1/14 (Gain)
B’s Sacrifice = 1/2 - 3/7 = (7-6)/14 = - 1/(14 )(Sacrifice)

Point of knowledge:-
Sacrificing ratio is the ratio in which one or more partners of the firm forego their share of profit in favour of one or more partners of the firm.

Question 2:  X, Y and Z are sharing profits and losses in the ratio of 5 : 3 : 2. With effect from 1st April, 2018, they decide to share profits and losses in the ratio of 5 : 2 : 3. Calculate each Partner's gain or sacrifice due to the change in ratio.

Old Ratio X: Y: Z = 5:3:2
New Ratio X: Y: Z = 5:3:2
Sacrificing Ratio = Old Ratio − New Ratio

X’s Sacrifice = 5/10 - 5/10 = (5-5)/10 = - 0/10  (No Gain or sacrifice)
Y’s Sacrifice = 3/10 - 2/10 = (3-2)/10 = -  1/10  (Sacrifice)
Z’s Sacrifice = 2/10 - 3/10 = (2-3)/10 = - 1/10  (Gain)

Point of knowledge:-
When we get zero from the calculation of gaining and sacrificing ratio it means, this the condition of no gain and no scarifies.

Question 3:  X, Y and Z are sharing profits and losses in the ratio of 5 : 3 : 2. With effect from 1st April, 2018, they decide to share profits and losses equally. Calculate each partner's gain or sacrifice due to the change in ratio.

Old Ratio X:Y:Z = 5:3:2
New Ratio X:Y:Z = 1:1:1
Sacrificing Ratio = Old Ratio − New Ratio
X’s Sacrifice = 5/10 - 1/3 = (15-10)/30 = -  5/30 (Sacrifice)
Y’s Sacrifice = 3/10 - 1/3 = (9-10)/30 = - 1/30  (Gain)
Z’s Sacrifice = 2/10 - 1/3 = (6-10)/30 = - 4/30 (Gain)

POINT OF KNOWLEDGE:-

Gaining Ratio is the ratio in which one or more partners gain share of profit as a result of sacrificed share in profit by one or more partners of the firm.

Question 4:  A, B and C are partners sharing profits and losses in the ratio of 5 : 4 : 1. Calculate new profit-sharing ratio, sacrificing ratio and gaining ratio in each of the following cases:
Case 1. C acquires 1/5th share from A.
Case 2. C acquires 1/5th share equally form A and B.
Case 3. A, B and C will share future profits and losses equally.
Case 4. C acquires 1/10th share of A and 1/2 share of B.

Accounting treatment of goodwill

Question 5:  A, B and C shared profits and losses in the ratio of 3 : 2 : 1 respectively. With effect from 1st April, 2018, they agreed to share profits equally. The goodwill of the firm was valued at Rs. 18,000. Pass necessary Journal entries when: (a) Goodwill A/c is not opened; and (b) Goodwill A/c is opened.

Case (i) when Goodwill A/c is not opened

Question 6:  X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2 . From 1st April, 2018, they decided to share profits and losses equally. The Partnership Deed provides that in the event of any change in the profit-sharing ratio, the goodwill should be valued at two years' purchase of the average profit of the preceding five years. The profits and losses of the preceding years are:

You are required to calculate goodwill and pass journal entry.

Question 7:  Mandeep, Vinod and Abbas are partners sharing profits and losses in the ratio of 3 : 2 : 1 . From 1st April, 2018, they decided to share profits and losses equally. The Partnership Deed provides that in the event of any change in the profit-sharing ratio, the goodwill shall be valued at three years' purchase of the average profit of last five years. The profits and losses of the past five years are:

Profit— Year ended  31st March, 2015—Rs. 1,00,000;  2016—Rs. 1,50,000;  2018—Rs. 2,00,000;  2019—Rs. 2,00,000;

Loss — Year ended 31st March, 2017—Rs 50,000.

Pass the journal entries showing the working.

Question 8:  X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2 , decided to share future profits and losses equally with effect from 1st April, 2018. On that date, the goodwill appeared in the books at Rs. 12,000. But it was revalue at Rs. 30,000. Pass journal entries assuming that goodwill will not appear in the books of A/c.

Question 9:  and B are partners in a firm sharing profits in the ratio of 2 : 1 . They decided with effect from 1st April, 2017, that they would share profits in the ratio of 3 : 2 . But, this decision was taken after the profit for the year 2017-18 amounting to Rs 90,000 was distributed in the old ratio.

Value of firm's goodwill was estimated on the basis of aggregate of two years' profits preceding the date decision became effective.

The profits for 2015-16 and 2016-17 were Rs 60,000 and Rs 75,000 respectively. It was decided that Goodwill A/c will not be opened in the books of the firm and necessary adjustment be made through Capital A/c’s which, on 31st March, 2018 stood, at Rs 1,50,000 for A and Rs 90,000 for B.

Pass necessary journal entries and prepare Capital A/c’s.

Question 10:  Jai and Raj are partners sharing profits in the ratio of 3 : 2 . With effect from 1st April, 2018, they decided to share profits equally. Goodwill appeared in the books at Rs. 25,000 . As on 1st April, 2018, it was valued at Rs. 1,00,000 . They decided to carry goodwill in the books of the firm.

Pass the journal entry giving effect to the above.

Accounting Treatment of Reserve and Accumulated Profit

Question 11:  and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2 . With effect from 1st April, 2018, they decided to share future profits equally. On the date of change in the profit-sharing ratio, the Profit and Loss A/c showed a credit balance of Rs 1,50,000. Record the necessary journal entry for the distribution of the balance in the Profit and Loss A/c immediately before the change in the profit-sharing ratio.

Question 12:  and B are partners in a firm sharing profits in the ratio of 4 : 1 . They decided to share future profits in the ratio of 3 : 2 w.e.f. 1st April,2018 . On that day, Profit and Loss A/c showed a debit balance of Rs 1,00,000. Pass journal entry to give effect to the above.

Question 13:  X, Y and Z are sharing profits and losses in the ratio of 5 : 3 : 2 . They decided to share future profits and losses in the ratio of 2 : 3 : 5 with effect from 1st April, 2018. They also decided to record the effect of the following accumulated profits, losses and reserves without affecting their book values by passing a single entry.

Question 14:  A, B and C who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in  the ratio of 2 : 3 : 5 . Give the journal entry to distribute ' Workmen Compensation Reserve' of Rs. 1,20,000 at the time of change in profit-sharing ratio, when:

(i) no information is given (ii) there is no claim against it.

Point of knowledge:-

♦ As workmen compensation reserve is a liability to the company so we are debited it for nullify the balance.

Question 15:  X, Y and Z who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in  the ratio of 2 : 3 : 5 . Give the journal entry to distribute ' Workmen Compensation Reserve' of Rs 1,20,000 at the time of change in profit-sharing ratio, when there is a claim  of Rs 80,000 against it.

Question 16:  X, Y and Z who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in  the ratio of 2 : 3 : 5  with effect from 1st April, 2018. Workmen Compensation Reserve appears at Rs. 1,20,000 in the Balance Sheet as at 31st March, 2018 and Workmen Compensation Claim is estimated at  Rs. 1,50,000. Pass journal entries for the accounting treatment of Workmen Compensation Reserve.

Question 17:   A, B and C who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in the ratio of 2 : 3 : 5 . Give the journal entry to distribute 'Investments Fluctuation Reserve' of Rs. 20,000 at the time of change in profit-sharing ratio, when investment (market value Rs. 95,000) appears in the books at Rs. 1,00,000.

Question 18:  Nitin, Tarun and Amar are partners sharing profits equally and decide to share profits in the ratio of 2 : 2 : 1 w.e.f . 1st April, 2018. The extract of their Balance Sheet as at 31st March, 2018 is as follows:

Pass the journal entries in each of the following situations:
(i) When its Market Value is not given;
(ii) When its Market Value is given as Rs  4,00,000;
(iii) When its Market Value is given as Rs  4,24,000;
(iv) When its Market Value is given as Rs  3,70,000;
(v) When its Market Value is given as Rs  3,10,000.

Question 19:  X, Y are partners sharing profits in the ratio of 2 : 1 . On 31st March, 2019, their Balance Sheet showed General Reserve of Rs. 60,000. It was decided that in future they will share profits and losses in the ratio of 3 : 2 . Pass necessary journal entry in each of the following alternative cases:

(i)      If General Reserve is not to be shown in the new Balance Sheet.

(ii)    If General Reserve is to be shown in the new Balance Sheet.

(i) If they do not want to show the General Reserve in the new Balance Sheet or When the partners want to transfer the general reserve to their capital A/c’s.

Question 20:  Bhavya and Sakshi are partners in a firm, sharing profits and losses in the ratio of 3 : 2. on 31st march, 2018 their balance sheet was as under:

The partners have decided to change their profit sharing ratio to 1 : 1 with immediate effect. For the purpose, they decided that:

(i)      Investments to be valued at Rs. 20,000.

(ii)    Goodwill of the firm be valued at Rs. 24,000.

(iii)   General Reserve not to be distributed between the partners.

You are required to pass necessary Journal entries in the books of the firm. Show workings.

Revaluation of Assets and Reassessment of Liabilities

Question 21:  X, Y and Z share profits as 5 : 3 : 2 . They decide to share their future profits as 4 : 3 : 3 with effect from 1st April, 2018. On this date the following revaluations have taken place:

Pass necessary adjustment entry to be made because of the above changes in the values of assets and liabilities. However, old values will continue in the books.

Question 22:  Ashish ,Aakash and Amit are partners sharing profits and losses  equally. The Balance Sheet as at 31st March, 2018 was as follows:

The partners decided to share profits in the ratio of 2 : 2 : 1 w.e.f . 1st April, 2018. They also decided that:
(i) Value of stock to be reduced to Rs 1,25,000.
(ii) Value of machinery to be decreased by 10%.
(iii) Land and Building to be appreciated by Rs 62,000.
(iv) Provision for Doubtful Debts to be made @ 5% on Sundry Debtors.
(v) Aakash was to carry out reconstitution of the firm at a remuneration of Rs 10,000.
Pass necessary journal entries to give effect to the above.

Question 23:  A, B and C are partners sharing profits and losses in the ratio of 5 : 3 : 2 . Their Balance Sheet as at 31st March, 2017 stood as follows:

They decided to share profits equally w.e.f. 1st April, 2017. They also agreed that:
(i) Value of Land and Building be decreased by 5% .
(ii) Value of Machinery is increased by 5%.
(iii) A Provision for Doubtful Debts be created @ 5% on Sundry Debtors.
(iv) A Motor Cycle valued at Rs 20,000 was unrecorded and is now to be recorded in the books.
(v) Out of Sundry Creditors, Rs 10,000 is not payable.
(vi) Goodwill is to be valued at 2 years' purchase of last 3 years profits. Profits being for 2016-17—Rs 50,000 (Loss); 2015-16—Rs 2,50,000 and 2014-15—Rs 2,50,000.
(vii) C was to carry out the work for reconstituting the firm at remuneration (including expenses) of Rs 5,000. Expenses came to Rs 3,000.
Pass Journal entries and prepare Revaluation A/c.

Question 24:  A, B and C are partners sharing profits and losses in the ratio of 2 : 2 : 1 . They decided to share profit w.e.f. 1st April, 2018 in the ratio of 5 : 3 : 2 . They also decided not to change the values of assets and liabilities in the books of A/c. The book values and revised values of assets and liabilities as on the date of change were as follows:

Preparation of Balance Sheet:

Question 25:  X, Y and Z are partners sharing profits and losses in the ratio of 7 : 5 : 4 . Their Balance Sheet as at 31st March, 2018 stood as:

Partners decided that with effect from 1st April, 2018 , they will share profits and losses in the ratio of 3 : 2 : 1  . For this purpose, goodwill of the firm was valued at Rs 1,50,000. The partners neither want to record the goodwill nor want to distribute the General Reserve  and profits.

Question 26:  A, B and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1 . Their Balance Sheet as on 31st March, 2015 was as follows:

From 1st April, 2015, AB and decided to share profits equally. For this it was agreed that:
(i) Goodwill of the firm will be valued  at Rs 1,50,000.
(ii) Land will be revalued at Rs 80,000 and building be depreciated by 6%.
(iii)  Creditors of Rs 6,000 were not likely to be claimed and hence should be written off.
Prepare Revaluation A/c, Partners' Capital A/cs and Balance Sheet of the reconstituted firm.

Question 27:  A and B are partners sharing profits in the ratio of 4 :3 . Their Balance Sheet as at 31st March, 2018 stood as:

They decided that with effect from 1st April, 2018, they will share profits and losses in the ratio of 2 : 1. For this purpose they decided that:
(i) Fixed Assets are to be depreciated by 10%.
(ii) A Provision for Doubtful Debts of 6% be made on Sundry Debtors.
(iii) Stock be valued at Rs. 1,90,000.
(iv) An amount of Rs. 3,700 included in Creditors is not likely to be claimed.
Partners decided to record the revised values in the books. However, they do not want to disturb the Reserve. You are required to pass journal entries, prepare Capital A/c’s of Partners and the revised Balance Sheet.

Question 28:  X, Y and Z are partners in a firm sharing profits and losses as 5 : 4 : 3 . Their Balance Sheet as at 31st March, 2018 was:

From 1st April, 2018, they agree to alter their profit-sharing ratio as 4 : 3 : 2 .It is also decided that :
(a) Furniture be taken at 80% of its value .
(b) Stock be appreciated by 20%.
(c) Plant and Machinery be valued at Rs. 4,00,000.
(d) Outstanding Expenses be increased by Rs. 13,000.
Partners agreed that altered values are not to be recorded in the books and they also do not want to distribute the General Reserve.
You are required to pass a single journal entry to give effect to the above. Also, prepare Balance Sheet of the new firm.

Question 29:  Balance Sheet of X and Y , who share profits and losses as 5 : 3 , as at 1st April, 2017 is :

On the above date, they decided to change their profit-sharing ratio to 3 : 5 and agreed upon the following :
(a) Goodwill be valued on the basis of two years' purchase of the average profit of the last three years. Profits for 2016-17——Rs. 7,500; 2017-18——Rs. 4,000; 2018-19——Rs. 6,500.
(b) Machinery and Stock be revalued at Rs. 45,000 and Rs. 8,000 respectively.
(c) Claim on A/c of workmen compensation is Rs. 6,000.
Prepare Revaluation A/c Partners' Capital A/c’s and the Balance Sheet of the new firm.

Question 30:  Ram, Mohan, Sohan and Hari were partners in a firm sharing profits in the ratio of 4 : 3 : 2 : 1. On 1st April, 2016 , their Balance Sheet  was as follows:

From the above date, the partners decided to share the future profits in the ratio of 1 : 2 : 3 : 4 . For this purpose the goodwill of the firm was valued at Rs 1,80,000. The partners also agreed for the following:

(a) The Claim for Workmen Compensation has been estimated at Rs 1,50,000.
(b) Adjust the Capitals of the partners according to the new profit-sharing ratio by opening Partners' Current A/c’s.
Prepare Revaluation A/c , Partners' Capital A/cs and the Balance Sheet of the reconstituted firm.

Total Capital of the reconstructed partnership = 4,42,000 + 4,59,000 + 2,26,000 + 1,43,000
= 12,70,000
The total capital of the reconstituted firm will be in the new ratio of
Ram:Mohan:Sohan:Hari = 1:2:3:4
Ram’s new capital = 12,70,000 × 1/10 = 1,27,000
Mohan’s new capital = 12,70,000 × 2/10 = 2,54,000
Sohan’s new capital = 12,70,000 × 3/10 = 3,81,000
Hari’s new capital = 12,70,000 × 4/10 = 5,08,000

Question 31:   Suresh, Ramesh, Mahesh and Ganesh were partners in a firm sharing profits in the ratio of 2:2:3:3. On 1st April, 2016, their Balance Sheet  was as follows:

From the above date, the partners decided to share the future profits equally. For this purpose the goodwill of the firm was valued at Rs. 90,000. It was also agreed that:

(a) Claim against Workmen Compensation Reserve will be estimated at Rs. 1,00,000 and fixed assets will be depreciated by 10%.
(b) The Capitals of the partners will be adjusted according to the new profit-sharing ratio. For this, necessary cash will be brought or paid by the partners as the case may be.
Prepare Revaluation A/c, Partners' Capital A/c’s and the Balance Sheet of the reconstituted firm.

Points of Knowledge:

Total Capital of the reconstructed partnership
= 78,500+1,28,500+1,79,000+2,29,000 = 6,15,000
The total capital of the reconstituted firm will be in the new ratio of
Suresh : Ramesh : Mahesh : Ganesh = 1:1:1:1
Suresh’s new capital = 6,15,000 × 1/4 = 1,53,750
Ramesh’s new capital = 6,15,000 × 1/4 = 1,53,750
Mahesh’s new capital = 6,15,000 × 1/4 = 1,53,750
Ganesh’s new capital = 6,15,000 × 1/4 = 1,53,750

Old Ratio of

Suresh : Ramesh : Mahesh : Ganesh  = 2:2:3:3

New Ratio of

Suresh : Ramesh : Mahesh : Ganesh  = 1:1:1:1
Sacrificing Ratio = Old Ratio - New Ratio

Question 32:  Following is the Balance Sheet of A and B , who shared Profits and Losses in the ratio of 2 : 1 , as at 1st April, 2019:

On the above date, the partners changed their profit-sharing ratio to 3 : 2 . For this purpose, the goodwill of the firm was valued at Rs 3,00,000 . The partners also agreed for the following:
(a) The value of Land and Building will be Rs 5,00,000;
(b) Reserve is to be maintained at Rs 3,00,000.
(c) The total capital of the partners in the new firm will be Rs 6,00,000 , which will be shared by the  partners in their new profit-sharing ratio .
Prepare Revaluation A/c , Partners' Capital A/c’s and the Balance Sheet of the reconstituted firm.