Question

Aman and Ankita are in partnership sharing profits and losses equally. Their combined capital account balance is ₹ 2,00,000. John is admitted as a partner. At the time of his admission:

(a) The value of non-current assets are to be increased by ₹ 30,000.

(b) John brings his share of Goodwill ₹ 20,000 which is distributed to the sacrificing partners and it is withdrawn by them.

After John's admission, the total of all the partners' capital accounts (including John's capital) is ₹ 2,70,000.

What is John's capital contribution?

Options

• ₹ 20,000

• ₹ 40,000

• ₹ 50,000

• ₹ 70,000

Answer 1

₹ 40,000

Explanation:

Given:

Aman + Ankita's combined capital = ₹ 2,00,000

Increase in non-current assets = ₹ 30,000

John brings goodwill = ₹ 20,000, which is withdrawn by Aman and Ankita

Total capital after John's admission = ₹ 2,70,000

Step 1: Revaluation gain

The increase in assets of ₹ 30,000 is credited to the existing partners' capital accounts.

So, their combined capital becomes:

₹ 2,00,000 + ₹ 30,000 = ₹ 2,30,000

Step 2: John's capital

John's ₹ 20,000 goodwill is distributed to Aman and Ankita and withdrawn by them, so it does not form part of the partners' capital balances.

Therefore:

John’s Capital = ₹ 2,70,000 − ₹ 2,30,000

₹ 40,000