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Pass the Necessary Journal Entries Assuming that a and B Brought in Or Withdrew the Necessary Cash as the Case May Be for Making Their Capitals in Proportion to Their Profit Sharing Ratio? - Accountancy

Journal Entry

A and B are partners sharing profits and losses in the ratio of 3:1. On Ist Jan. 2017 they admitted C as a new partner for 1/4 share in the profits of the firm. C brings Rs 20,000 as for his 1/4 share in the profits of the firm. The capitals of A and B after all adjustments in respect of goodwill, revaluation of assets and liabilities, etc. has been worked out at Rs 50,000 for A and Rs 12,000 for B. It is agreed that partner’s capitals will be according to new profit sharing ratio. Calculate the new capitals of A and B and pass the necessary journal entries assuming that A and B brought in or withdrew the necessary cash as the case may be for making their capitals in proportion to their profit sharing ratio?

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Solution

Books of A, B and C

Journal

Date

Particulars

L.F.

Amount

Rs

Amount

Rs

2017

 

 

 

 

 

Jan. 01

A’s Capital A/c

 Dr.

 

5,000

 

 

 

To Cash A/c

 

 

 

5,000

 

(Excess capital withdrawn by A)

 

 

 

 

 

 

 

 

 

 

Cash A/c

Dr.

 

3,000

 

 

 

To B’s Capital A/c

 

 

 

3,000

 

(Capital brought in by B to make in proportion to the profit sharing)

 

 

 

1) Calculation of New Profit sharing Ratio

C's Share = `1/4`
Remaining share = 1 - `1/4` = `3/4`

A's new share = `3/4 xx 3/4 = 9/16`

B's new share = `1/4 xx 3/4 = 3/16`

`{ "C's  share" = 1/4 xx 4/4 = 4/16}`

New Profit sharing ratio of A, B and C will be 9:3:4

2) New Capital of A and B.

C bring Rs 20,000 for 1/4th share of profit in the new firm.

Thus, total capital of firm on the basis of C’s share
= 20,000 x `4/1` = 80,000 

A's Capital = `9/16` x 80,000 = 45,000

Thus, A will withdraw = 50,000 - 45,000 = 5,000

B's Capital = `3/16` x 80,000 = 15,000

Thus, B’s will bring 15,000 − 12,000 = 3,000

Concept: Admission of a New Partner
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APPEARS IN

NCERT Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts
Chapter 3 Reconstitution of a Partnership Firm – Admission of a Partner
Exercise | Q 31 | Page 169
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