Madhu, Raj, Atul and Prachi were partners in a firm sharing profit and losses in the ratio of $\displaystyle 3$ : $\displaystyle 2$ : $\displaystyle 4$ : 1. With effect from 1st April, $\displaystyle 2023$, they decided to share profits and losses equally. Their Balance Sheet showed a General Reserve of ₹ $\displaystyle 1,00$,000. The goodwill of the firm was valued at ₹ $\displaystyle 20,00$,000. Pass necessary journal entries for the above on account of change in the profit sharing ratio. Show your working clearly.

Books of Madhu, Raj, Atul and Prachi Journal Date Particulars L.F Dr. Amount Cr. Amount ₹ ₹ $\displaystyle 2023$ General Reserve A/c Dr $\displaystyle 1,00,000$ April $\displaystyle 1$ To Madhu’s Capital A/c $\displaystyle 30,000$ To Raj’s Capital A/c $\displaystyle 20,000$ To Atul’s Capital A/c $\displaystyle 40,000$ To Prachi’s Capital A/c $\displaystyle 10,000$ (Distribution of General Reserve in old profit-sharing ratio) $\displaystyle 2023$ Raj’s Capital A/c Dr $\displaystyle 1,00,000$ April $\displaystyle 1$ Prachi’s Capital A/c Dr $\displaystyle 3,00,000$ To Madhu’s Capital A/c $\displaystyle 1,00,000$ To Atul’s Capital A/c $\displaystyle 3,00,000$ (Adjustment for Goodwill on account of change in profit sharing ratio) Working notes: Calculation of gain/ sacrifice Gaining Share = New share- Old share Madhu = $\displaystyle 1$/$\displaystyle 4$ - $\displaystyle 3$/$\displaystyle 10$ = -$\displaystyle 1$/$\displaystyle 20$ (Sacrifice) Raj = $\displaystyle 1$/$\displaystyle 4$- $\displaystyle 2$/$\displaystyle 10$ = $\displaystyle 1$/$\displaystyle 20$ (Gain) Atul = $\displaystyle 1$/$\displaystyle 4$- $\displaystyle 4$/$\displaystyle 10$ = -$\displaystyle 3$/$\displaystyle 20$ (Sacrifice) Prachi = $\displaystyle 1$/$\displaystyle 4$ - $\displaystyle 1$/$\displaystyle 10$ = $\displaystyle 3$/$\displaystyle 20$ (Gain)