TS Grewal Class 12 Accountancy Volume 1 Chapter 4 Solutions

This chapter indicates if the students want to understand and score marks in chapter 4 accounts class 12, TS Grewal solutions are the best options. The lucid language of TS Grewal Class 12 Solutions Chapter 4 will help the students to grasp the topic quickly. Moreover, the different kinds of problems, along with their solutions, are also present in the chapter. Practicing such issues as presented in TS Grewal Class 12, Chapter 4 Solutions will enable the student to score well in any examination.

One type of business reconstitution is a change in the profit-sharing ratio among existing partners. The partners' commitment to the firm's activities has not changed. The profit-sharing percentage among existing partners is the sole change.

The partners may choose to change their current profit-sharing ratio without any admission or retirement of a partner. This may result in some partners gaining and others losing. Profit-making partners should compensate the sacrificial partner/partners in the profit-sharing ratio.

Profit-Sharing Ratio (New Profit-Sharing Ratio)

The proportion at which the partners agreed to share future profits and losses.

Ratio Sacrifice

The percentage of profit that partners have committed to giving up to benefit other partners.

Old Ratio - New Ratio = Sacrificing Ratio

Ratio of Gaining

The percentage of profit that each partner has agreed to receive from the other partners.

New Ratio – Old Ratio = Gaining Ratio

Subsequent Modifications

As a result, only minor modifications are made in the firm's records for this purpose. These modifications are as follows:

Assets and liabilities are revalued; reserves, profits, and losses, if any, are adjusted, and so on.

Goodwill Adjustments

Goodwill is one of the unique features that must be adjusted throughout the reorganization of a company. The gaining partner pays the sacrificing partner a proportionate share of goodwill equal to his share of the goodwill acquired.

Assets and Liabilities Revaluation:

The assets and liabilities are revalued at the time of the firm's reconstitution. Assets and obligations are revalued and liabilities are reassessed because:

• To balance the books by adjusting the assets and liabilities to their correct levels.

• To determine the firm's actual status, unrecorded assets and liabilities are placed into the company's accounts.

• Profit and loss resulting from the revaluation up to the date of reconstitution might be adjusted in the capital accounts of the partners in their sacrificial ratio.
  
  

Reserve Adjustments, Accumulated Profits, and Losses

Reserves and accrued profits/losses on the balance sheet should be moved to the capital accounts of the partner. It is important to make an adjustment item in the firm's records if the partners decide to leave them alone. In that instance, the gaining partner must reimburse the sacrificing partner for the proportionate share of profits and reserves that he has earned.

Change in the Existing Partners' Profit Share Ratio:

At any time, the partners may opt to adjust their profit-sharing percentages. As a result, some partners lose their stake while others gain.

At the time where the profit-sharing ratio changes, some adjustments are done.

As a result, the Gaining (winner) partner pays the Sacrificing (loss).

At the Time of a Change in the Profit-Sharing Ratio, Adjustments are Required:

1. Calculation of the Sacrificing and Gaining Ratios

2. Keeping track of goodwill

3. Reserves and Accumulated Profits are treated differently in accounting.

4. Revaluation of Assets and Liabilities Accounting

5. Capitalization needs to be adjusted.

Reserve for Investment Fluctuation:

Investments made by a company are vulnerable to market changes, which means that the value of an investment can drop dramatically at any time. As a result, an Investment Fluctuation Reserve is kept to cover any losses suffered as a result of a sudden drop in the realizable value of investments.

T.S. Grewal's Accountancy Book Solutions: 

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The solutions were created using the approved syllabus and suggested answers by accountancy teachers, and they can be used to assist you to prepare for an examination or for everyday practice work. Our teachers have supplied pupils with step-by-step solutions as well as critical points to remember.to practice

Change in Profit-Sharing Ratio Among Existing Partners 

Apart from cases of retirement, admission, or death of partners, the existing partners can also opt for a change in the ratio of profit sharing. Such changes can result in a gain for some while loss for others. The gaining partners are liable to compensate for the loss of the sacrificing partners. Certain terminologies are associated with such changes as discussed in ch 4 Accounts Class 12 TS Grewal Solutions.

• The New Ratio for Profit Sharing - The ratio in which the partners decide for sharing profits and losses.
• Sacrificing Ratio - The sacrifice or the loss which one of the partners incurs for ensuring gain for the other partner. 
• Gaining Ratio - The profit that one of the partners enjoys at the cost of sacrifice from the other partner.
• Adjustment for Goodwill - The compensation that the gaining partners provide to the sacrificing partner as a goodwill gesture, is comparable to their gain.
• Liabilities and Assets Revaluation - Proper revaluation of all the assets and liabilities involved in the partnership sharing.
  
  

Profit and Loss Accumulation, Reserve Adjustments - Proper Adjustments to the profits and losses accumulated and the reserves needed to be transferred to the partners' capital accounts. Even if the partners do not want to transfer any amount, proper notes must be kept in records.

TS Grewal Class 12 Chapter 4 Solutions for Better Marks

• Read all the concepts mentioned in Class 12 Accounts Chapter 4 TS Grewal solutions carefully.

• Have a clear idea of every concept and its application.

• Look at different types and problems shown in Chapter 4 Accounts Class 12 TS Grewal solutions and how to solve them.

• Practice different types of problems to get the hang of all the types.

• If you face any difficulty in understanding any concept or any problem mentioned in TS Grewal Class 12 Chapter 4 solutions, get into its detail.

• Work more on your weaknesses so that you are prepared well for your exam.

Conclusion

Class 12 Accounts Chapter 4 TS Grewal solution is the best source of information and revision for students taking any board examination. All the concepts related to changes in profit sharing ratio between existing partners are described in this chapter. The students will feel confident about the subject after reading these notes.