# 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?

#### 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Date Particulars L.F. Amount Rs Amount Rs 2017 Jan. 01 A’s Capital A/c Dr. 5,000 To Cash A/c 5,000 (Excess capital withdrawn by A) Cash A/c Dr. 3,000 To B’s Capital A/c 3,000 (Capital brought in by B to make in proportion to the profit sharing)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
Is there an error in this question or solution?

#### 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