Profit Sharing Ratio

Step 1: Understand the situation.
The partners have decided to share the profit equally from April 1, 2024. To effect this change, we need to adjust the existing balances in the General Reserves, Workmen Compensation Reserve, and Profit & Loss Account, based on their old profit-sharing ratio (4:3:2) and the new ratio (1:1:1). The reserves and profit need to be adjusted to reflect the change in profit-sharing ratio.
Step 2: Journal Entries.
1. For the General Reserves: The General Reserves need to be divided according to the old profit-sharing ratio of 4:3:2. The total General Reserves amount is ₹1,80,000.
Journal Entry: 2. For the Workmen Compensation Reserve: Similarly, the Workmen Compensation Reserve needs to be divided according to the old profit-sharing ratio of 4:3:2. The total Workmen Compensation Reserve amount is ₹2,25,000.
Journal Entry: 3. For the Profit & Loss Account (Dr.): The debit balance in the Profit & Loss Account of ₹4,50,000 needs to be adjusted. Since they are now sharing profits equally, the loss will be shared equally between Sita, Gita, and Rita.
Journal Entry: Step 3: Conclusion.
These journal entries will adjust the partners' capital accounts to reflect the new profit-sharing ratio.