Question

Vinay, Tarun and Arjun are partners in a firm sharing profits and losses in the ratio of 4 : 3 : 2 respectively. On Tarun's retirement from the firm on 1st April, 2022. his capital account, after all adjustments, stood at ₹ 1,14,000. The partners decided that:

1. Tarun to be paid 50% of the amount due to him immediately and the balance by accepting a Bill of Exchange (without interest) payable at the expiry of 3 months.
2. The continuing partners to re-adjust their capitals in their new profit-sharing ratio in the reconstituted firm. Any surplus/deficit in their capital accounts to the adjusted through their current accounts.

Upon re-adjustment of their capitals, Vinay's capital showed a deficit of ₹ 1,000 while Arjun's capital had a surplus of ₹ 1,000.

You are required to pass journal entries to record:

1. The closing of the retiring partner's capital account.
2. Adjustment of surplus/deficit in the capital accounts of the continuing partners.

Answer 1

Journal Entries
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
2022
April 1	Tarun's Capital A/c    ...Dr.		1,14,000
	To Bank A/c			57,000
	To Bills Payable A/c			57,000
	(Tarun' s capital A/c closed by paying half amount immediately and half by accepting a bill of exchange)
April 1	Vinay's Current A/c   ...Dr.		1,000
	To Vinay's Capital A/c			1,000
	(Deficit of Vinay's Capital adjusted through his Current A/c)
April 1	Arjun's Capital A/c    ...Dr.		1,000
	To Arjun's Current A/c			1,000
	(Surplus in Arjun's capital adjusted through his Current A/c)

Answer 2

Journal Entries
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
2022
April 1	Tarun's Capital A/c    ...Dr.		1,14,000
	To Bank A/c			57,000
	To Bills Payable A/c			57,000
	(Tarun's capital A/c closed by paying half amount immediately and half by accepting a bill of exchange)
April 1	Vinay's Current A/c   ...Dr.		1,000
	To Vinay's Capital A/c			1,000
	(Deficit of Vinay's Capital adjusted through his Current A/c)
April 1	Arjun's Capital A/c    ...Dr.		1,000
	To Arjun's Current A/c			1,000
	(Surplus in Arjun's capital adjusted through his Current A/c)