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# Naresh, David and Aslam Are Partners Sharing Profits in the Ratio of 5:3:7. on April 1st, 2012, Naresh Gave the Notice to Retire from the Firm. His Amount is to Be Paid by David and Aslam in Such a Way that Their Capitals Become Proportionate to Their New Profit Sharing Ratio. Pass Necessary Journal Entries for the Above Transactions in the Books of the Firm. Show Your Working Clearly - CBSE (Arts) Class 12 - Accountancy

ConceptRetirement Or Death of a Partner - Adjustment of Capitals

#### Question

Naresh, David and Aslam are partners sharing profits in the ratio of 5:3:7. On April 1st, 2012, Naresh gave the notice to retire from the firm. David and Aslam decided to share future profits in the ratio of 2 : 3. The adjusted capital accounts of David and Aslam show a balance of Rs 33,000 and Rs 70,500 respectively. The total amount of the paid to Naresh is Rs 90,500. This amount is to be paid by David and Aslam in such a way that their capitals become proportionate to their new profit sharing ratio. Pass necessary journal entries for the above transactions in the books of the firm. Show your working clearly.

#### Solution

 Journal Date Particulars L.F. Dr. Rs Cr. Rs Cash A/c            Dr.         To David's Capital A/c         To Aslam's Capital A/c (Being Being Deficiency in capital to be brought in by David and Aslam) 90,500 44,600 45,900

Working Notes

Adjusted Capital of David = 33,000

Adjusted Capital of Aslam = 70,500

Amount Payable to Naresh = 90,500

Total Capital of the New firm = Total Adjusted Capital of David and Aslam + Amount Payable

= (33,000 + 70,500) + 90,500 = 1,94,000

New Ratio = 2:3

New Capital of David = 194000 xx 2/5 = 77600

New Capital of Aslam = 194000 xx 3/5 = 116400

Calculation of Amount to be Paid off/Brought in by David and Aslam

 Particulars David Aslam New Capital Balance 77,600 1,16,400 Old Adjusted Capital 33,000 70,500 Amount to be brought in 44,600 (Deficit) 45,900 (Deficit)

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Solution Naresh, David and Aslam Are Partners Sharing Profits in the Ratio of 5:3:7. on April 1st, 2012, Naresh Gave the Notice to Retire from the Firm. His Amount is to Be Paid by David and Aslam in Such a Way that Their Capitals Become Proportionate to Their New Profit Sharing Ratio. Pass Necessary Journal Entries for the Above Transactions in the Books of the Firm. Show Your Working Clearly Concept: Retirement Or Death of a Partner - Adjustment of Capitals.
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