Question

Aryan, Sahira and Tulsi are partners in a firm with profit sharing ratio of 3 : 2 : 4. Sahira died on 31st March, 2025. The new profit sharing ratio between Aryan and Tulsi was agreed to be 2 : 3.

The capital accounts of partners on 31st March, 2025, before considering the firm’s goodwill were: Aryan ₹ 11,40,000; Sahira ₹ 10,65,000; Tulsi ₹ 12,30,000.

Aryan and Tulsi agreed to pay the executors of Sahira ₹ 11,85,000 immediately by issuing a cheque from the firm, the amount being contributed by Aryan and Tulsi in such a way that their capitals would become proportionate to their new profit sharing ratio.

You are required to pass necessary journal entries.

Answer 1

Journal Entry
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Aryan’s Capital A/c    ...Dr.		36,000
	Tulsi’s Capital A/c    ...Dr.		84,000
	To Sahira’s Capital A/c			1,20,000
	(Being Sahira’s share of Goodwill adjusted to remaining partners in gaining ratio 3 : 7)
	Bank A/c        ...Dr.		11,85,000
	To Aryan’s Capital A/c			2,70,000
	To Tulsi’s Capital A/c			9,15,000
	(Being Cash brought in by Aryan and Tulsi to settle Sahira’s executor A/c)
	Sahira’s executor’s A/c        ...Dr.		11,85,000
	To Bank A/c			11,85,000
	(Being Payment made to Sahira’s executor)

Working notes:

(i) Gaining Ratio = New Ratio – Old Ratio

Aryan = `2/5-3/9=(18-15)/45=3/45`

Tulsi = `3/5-4/9=(27-20)/45=7/45`

Gaining ratio = 3 : 7

Sahira’s Share in Goodwill = 11,85,000 – 10,65,000 = ₹ 1,20,000

Aryan = `1,20,000xx3/10` = ₹ 36,000

Tulsi = `1,20,000xx7/10` = ₹ 84,000

(ii) 

Capital in the new firm:	₹
Amount required to pay off Sahira	11,85,000
Add: Existing Capital of Aryan (11,40,000 – 36,000)	11,04,000
Add: Existing Capital of Tulsi (12,30,000 – 84,000)	11,46,000
	34,35,000

Aryan’s Capital in New Firm = `34,35,000xx2/5` = ₹ 13,74,000

Tulsi’s Capital in New Firm = `34,35,000xx3/5` = ₹ 20,61,000

	Aryan	Tulsi
	₹	₹
Required Capital	13,74,000	20,61,000
Existing Capital	11,04,000	11,46,000
Cash to be brought in	2,70,000	9,15,000