Question

X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 2 : 1. On April 1st 2024, X retires from the firm, Y and Z agree that the capital of the new firm shall be fixed at ₹ 2,10,000 in the profit sharing ratio. The Capital Accounts of Y and Z after all adjustments on the date of retirement showed balances of ₹ 1,45,000 and ₹ 63,000 respectively. State the amount of actual cash to be brought in or to be paid to the partners.

Answer 1

Old ratio = X : Y : Z = 3 : 2 : 1

After X's retirement, Y and Z share profits in their old ratio:

Y : Z = 2 : 1

Step 1: Calculate fixed capitals

Total capital of new firm = ₹ 2,10,000

Y's capital:

`₹ 2,10,000 xx 2/3 = ₹ 1,40,000`

Z's capital:

`₹ 2,10,000 xx 1/3 = ₹ 70,000`

Step 2: Compare with existing capital balances

Partner	Capital after adjustments	Required Capital	Cash Adjustment
Y	₹ 1,45,000	₹ 1,40,000	₹ 5,000 paid to Y
Z	₹ 63,000	₹ 70,000	₹ 7,000 brought in by Z