Question

Ajay, Vijay and Sanjay are partners in a firm sharing profits and losses in the ratio of 5 : 4 : 3. Vijay retires. After making all adjustments relating to revaluation, goodwill and accumulated profits, etc. the capital account of Ajay showed a credit balance of ₹ 2,00,000 and that of Sanjay ₹ 1,00,000. It was decided to adjust the capitals of Ajay and Sanjay in their profitsharing ratio. You are required to calculate the new capital of the partners' and record necessary entry for surplus/deficit.

Answer 1

1. Calculation of New Profit-Sharing Ratio

Old Ratio (Ajay : Vijay : Sanjay): 5 : 4 : 3

Vijay retires. Since no new acquisition details or ratios are provided, the remaining partners keep their relative old ratio.

New Profit-Sharing Ratio (Ajay : Sanjay): 5 : 3

2. Calculation of Total and Individual New Capital

Adjusted Capital of Ajay: ₹ 2,00,000

Adjusted Capital of Sanjay: ₹ 1,00,000

Total Capital of the New Firm: 2,00,000 + 1,00,000 = 3,00,000

Allocation of New Capitals (in the ratio of 5 : 3):

Ajay's New Capital: `3,00,000 xx 5/8 = 1,87,500`

Sanjay's New Capital: `3,00,000 xx 3/8 = 1,12,500`

3. Calculation of Surplus/Deficit

Partner	New Required Capital (₹)	Existing Adjusted Capital (₹)	Difference (Surplus/Deficit) (₹)	Action Required
Ajay	1,87,500	2,00,000	\(+12,500\) (Surplus)	Withdraw Cash
Sanjay	1,12,500	1,00,000	\(-12,500\) (Deficit)	Bring in Cash

 

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Ajay's Capital A/c   ...Dr.		12,500
	To Bank (or Cash) A/c			12,500
	(Being surplus capital withdrawn by Ajay to align with his new profit-sharing ratio)
2.	Bank (or Cash) A/c   ...Dr.		12,500
	To Sanjay's Capital A/c			12,500
	(Being deficit capital brought in by Sanjay to align with his new profit-sharing ratio)