Question

Pinky, Qumar and Roopa, partners in a firm sharing profits and losses in the ratio of 3:2:1. Seema is admitted as a new partner for $\frac{1}{4}$ share in the profits of the firm which he gets $\frac{1}{8}$ from Pinky and $\frac{1}{16}$ each from Qumar and Roopa. The total capital of the new firm after Seema's admission will be Rs. 2,40,000. Seema is required to bring in cash equal to $\frac{1}{4}$ of the total capital of the new firm. The capitals of the old partners also have to be adjusted in the proportion of their profit sharing ratio. The capitals of Pinky, Qumar, and Roopa after all adjustments in respect of goodwill and revaluation of assets and liabilities have been made are Pinky Rs. 80,000, Qumar Rs. 30,000 and Roopa Rs. 20,000. Calculate the capitals of all the partners and record the necessary journal entries for doing adjustments in respect of capitals according to the agreement between the partners.

Answer 1

New profit sharing ratio of

Pinky = $\frac{3}{6}-\frac{1}{8}=\frac{12-3}{24}=\frac{9}{24}$

Qumar = $\frac{2}{6}-\frac{1}{16}=\frac{16-3}{48}=\frac{13}{48}$

Roopa = $\frac{1}{6}-\frac{1}{16}=\frac{8-3}{48}=\frac{5}{48}$

Hence, new ratio = $\frac{9}{24}:\frac{13}{48}:\frac{5}{48}:\frac{1}{4}$

or $\frac{18}{48}:\frac{13}{48}:\frac{5}{48}:\frac{12}{48}$

or 18 : 13 : 5 : 12

Capital = 2,40,000

Each partner's new capital

Pinky = $2,40,000\times \frac{18}{48}=90,000$

Qumar = $2,40,000\times \frac{13}{48}=65,000$

Roopa = $2,40,000\times \frac{5}{48}=25,000$

Seema = $2,40,000\times \frac{12}{48}=60,000$

Adjustment in cash if any

$\begin{array}{cccc}\text{Partner}& \text{Actual Capital After}& \text{New Capital}& \text{Difference}\\ & \text{All Adjustments}& \text{Required}& \text{Excess / Short}\\ \text{Pinky}& 80,000& 90,000& 10,000\text{short}\\ \text{Qumar}& 30,000& 65,000& 35,000\text{short}\\ \text{Roopa}& 20,000& 25,000& 5,000\text{short}\\ \text{Seema}& & 60,000& 60,000\text{(his share)}\end{array}$

$\text{Journal Entry}$
$\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{L.F}& \text{Amt.(Cr)}& \text{Amt.(Cr)}\\ \text{(i)}& \text{Cash A/c}\text{Dr}& & 1,10,000& \\ & \text{To Pinki's Capital A/c}& & & 10,000\\ & \text{To Qumar's Capital A/c}& & & 35,000\\ & \text{To Roopa's Capital A/c}& & & 5,000\\ & \text{To Seema's Capital A/c}& & & 60,000\\ & \text{(Capital Rs. 60,000 paid by Seema and adjustment}& & & \\ & \text{of deficiency paid by existing partners.)}& & & \\ & \underset{–}{}& & & \end{array}$

Alternatively

$\text{Journal Entries}$
$\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{L.F}& \text{Amt.(Cr)}& \text{Amt.(Cr)}\\ \text{(i)}& \text{Bank A/c}\text{Dr}& & 60,000& \\ & \text{To Seema's Capital A/c}& & & 60,000\\ & \text{(Seema bring her share of capital for 1/4 share of profit)}& & & \\ & \underset{–}{}& & & \\ \text{(ii)}& \text{Bank A/c}\text{Dr}& & 50,000& \\ & \text{To Pinki's Capital A/c}& & & 10,000\\ & \text{To Qumar's Capital A/c}& & & 35,000\\ & \text{To Roopa's Capital A/c}& & & 5,000\\ & \text{(Amount brought by Pinky, Qumar}& & & \\ & \text{and Roopa to move capital equal to their proportion.)}& & & \end{array}$