Question

Guru and Prakash were partners in a firm sharing profits and losses in the ratio of 7 : 3. They admitted Anu as a new partner for 1/4th share in the profits of the firm. On the date of Anu's admission, the Profit and Loss Account of Guru and Prakash showed a credit balance of ₹ 40,000. The necessary journal entry for its treatment will be:

• A. A
• B. B
• C. C
• D. D

Hint:

At the time of admission of a new partner:

• Credit balance in P\& L A/c (Accumulated Profits) \(\Rightarrow\) Transfer to Old Partners' Capital A/cs in Old Ratio
• Debit balance in P\& L A/c (Accumulated Losses) \(\Rightarrow\) Transfer from Old Partners' Capital A/cs in Old Ratio

New partner is not entitled to past profits or losses!

Answer 1

The Correct Option is B