X, Y and Z were partners sharing profits and losses in the ratio of 3:2:1. The position of the firm as on 1.1.2017 was:

On this date, the partners decided to change their profit and loss sharing ratio to 1:2:3. Goodwill was valued at ₹18,000. No entries were, however, passed to give effect to this change. On 31.12.2017, the Balance Sheet of the firm was :On 31.12.2017, the firm was sold as a going concern to Y for ₹1,35,000. Y introduced sufficient funds to pay off X and Z.

You are asked to :

(a) Pass journal entries on 31.12.2017 to give effect to the above change in the constitution of the firm on 1.1.2017 and to close the books of the firm, on sale of business

(b) Prepare the Balance Sheet of Y as on 1.1.2018

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X's capital Y's capital Z's capital General Reserve Capital Reserve Creditors Liabilities ₹ 30,000 Fixed Assets 20,000 Debtors 10,000 Stock 12,000 Bank Balance 9,000 39,000 1,20,000 Assets ₹ 40,000 30,000 40,000 10,000 1,20,000