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
|Liabilities||Amount (Rs.)||Assets||Amount (Rs.)|
|Creditors||50,000||Cash in hand||40,000|
|General Reserve||60,000||Cash at Bank||2,00,000|
|Q 3,00,000||Fixed Assets||5,60,000|
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.