21 :- Bootstrap and Davy Jones partners sharing profits in the ratio of 2 : 1. On 31st March, 2025, 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:
- When General Reserve is not to be shown in the new Balance Sheet.
- When General Reserve is to be shown in the new Balance Sheet.
Solution :-
WORKING NOTES :-
Calculation of sacrificing/gaining ratio
Old ratio = 2:1
New ratio = 3:2
Bootstrap = 2/3 – 3/5 = 1/15 (sacrifice)
Davy jones = 1/3 – 2/5 = -1/15 (gain)
Bootstrap sacrifices = 60,000 x 1/15 = Rs 4,000
Davy jones gains = 60,000 x 1/15 = Rs 4,000