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A and B are partners sharing profits and losses in the ratio of 3:1. On 1st Jan. 2017 they admitted C as a new partner for 1/4 share in the profits of the firm. C brings ₹ 20,000 as for his 1/4 share in the profits of the firm. The capitals of A and B after all adjustments in respect of goodwill, revaluation of Liabilities and Assets, etc. has been worked out at ₹ 50,000 for A and ₹ 12,000 for B. It is agreed that partner’s capitals will be according to new profit sharing ratio. Calculate the new capitals of A and B and pass the necessary journal entries assuming that A and B brought in or withdrew the necessary cash as the case may be for making their capitals in proportion to their profit sharing ratio?



Answer -


Books of A, B and C

Journal

 

Date

Particulars

L.F.

Amount

₹

Amount

₹

2017

 

 

 

 

 

Jan. 01

A’s Capital A/c

 Dr.

 

5,000

 

 

 

To Cash A/c

 

 

 

5,000

 

(Excess capital withdrawn by A)

 

 

 

 

 

 

 

 

 

 

Cash A/c

Dr.

 

3,000

 

 

 

To B’s Capital A/c

 

 

 

3,000

 

(Capital brought in by B to make in proportion to the profit sharing)

 

 

 

 

 

 

 

 
1) Calculation of New Profit sharing Ratio
 
New Profit sharing ratio of A, B and C will be 9:3:4
2) New Capital of A and B.
C bring ₹ 20,000 for 1/4th share of profit in the new firm.
Thus, total capital of firm on the basis of C’s share= 
 
 
Thus, B’s will bring 15,000 − 12,000 = 3,000

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