Question

A, B and C are partners sharing profits in the ratio of 2 : 2 : 1. A retires and after all adjustments relating to revaluation, goodwill and accumulated profits the capital account of B showed a credit balance of Rs 1,40,000 and that of C Rs 1,00,000. It was decided to adjust the capitals of B and C in their profit sharing ratio. Calculate the new capitals of the partners and record necessary entry for bringing in or withdrawing cash.

Answer 1

Total Capital of B and C after all adjustments = Rs 1,40,000 + Rs 1,00,000

= Rs 2,40,000.

This Capital should be in their profit sharing ratio, i.e., 2 : 1.

$\therefore$ B's Capital in the new firm should be $=2,40,000\times \frac{2}{3}=Rs1,60,000$

C's Capital in the new firm should be $=2,40,000\times \frac{1}{3}=Rs80,000$

Hence, Cash to be brought in by B = Rs 1,60,000 - Rs 1,40,000 = Rs 20,000

Cash to be withdrawn by C = Rs 1,00,000 - Rs 80,000 = Rs 20,000

JOURNAL

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Dr. (Rs)}& \text{Cr. (Rs)}\\ & \text{Bank A/c}& \text{Dr.}& & 20,000& \\ & \text{To B's Capital A/c}& & & & 20,000\\ & \text{(Amount brought in by B to raise his capital to profit}& & & & \\ & \text{sharing ratio)}& & & & \\ & \overline{\text{C's Capital A/c}}& \text{Dr.}& & 20,000& \\ & \text{To Bank A/c}& & & & 20,000\\ & \text{(Amount withdrawn by C to bring his capital to profit}& & & & \\ & \text{sharing ratio)}& & & & \end{array}$