Sanjana and Mehul were partners in a firm sharing profits and losses in the ratio of $\displaystyle 4$ : 1. From 1st April, $\displaystyle 2025$, they decided to share future profits and losses in the ratio of $\displaystyle 5$ : 3. On this date, their balance sheet showed a balance of ₹ $\displaystyle 40,000$ in General Reserve Account and a debit balance of ₹ $\displaystyle 1,80,000$ in the Profit and Loss Account. The partners decided to distribute the General Reserve, but decided not to disturb the Profit and Loss Account, which will continue in the books of the reconstituted firm. Pass necessary journal entries for the above transactions on the reconstitution of the firm. Show your workings clearly.

Books of Sanjana and Mehul Journal Date Particulars L.F. Dr. Cr. Amount Amount (₹) (₹) $\displaystyle 2025$ General Reserve A/c Dr. $\displaystyle 40,000$ April $\displaystyle 1$ To Sanjana’s Capital A/c $\displaystyle 32,000$ To Mehul’s Capital A/c $\displaystyle 8,000$ (General Reserve distributed among the partners in their old profit-sharing ratio) April $\displaystyle 1$ Sanjana’s Capital A/c Dr. $\displaystyle 31,500$ To Mehul’s Capital A/c $\displaystyle 31,500$ (Adjustment entry passed for debit balance of Profit and loss account) Calculation of Sacrificing share: Sacrificing Share = Old Share – New Share Sanjana = $\displaystyle 4$/$\displaystyle 5$ – $\displaystyle 5$/$\displaystyle 8$ = $\displaystyle 32$-$\displaystyle 25$/$\displaystyle 40$ = $\displaystyle 7$/$\displaystyle 40$ sacrifice Mehul = $\displaystyle 1$/$\displaystyle 5$ – $\displaystyle 3$/$\displaystyle 8$ = $\displaystyle 8$-$\displaystyle 15$/$\displaystyle 40$ = ($\displaystyle 7$/$\displaystyle 40$) gain