P, Q and R were partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. On 31st March, 2018 their Balance Sheet was as follows:

Balance Sheet of P, Q and R as at 31st March, 2018

LiabilitiesAmount (Rs.)AssetsAmount (Rs.)
Creditors50,000Cash in hand40,000
General Reserve60,000Cash at Bank2,00,000
Capital: Stock50,000
P     2,00,000 Debtors60,000
Q    3,00,000 Fixed Assets5,60,000
R     3,00,0008,00,000  
 Total9,10,000  Total9,10,000

On the above date the firm was reconstituted and it was decided that :

(i) The new profit sharing ratio will be 2 : 2 : 1.

(ii) Bad debts Rs.  6,000 were to be written off and a provision of Rs.  3,000 was to be made for bad and doubtful debts.

(iii) The capital of the partners will be adjusted in the new firm in their profit sharing ratio. For this, partners’ current accounts will be opened.

Pass the necessary journal entries on the reconstitution of the firm.

Marks-6, CBSE:2018-19/Main/04/Q-13*

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