Question

Runa and Ria were partners in a firm sharing profits and losses in the ratio of 3 : 1. On 1st April, 2020, Uday is admitted as a new partner in the firm for `3/8`th share in the profits on various terms, one of them being his contribution of ₹ 42,000 as capital.

The new profit-sharing ratio amongst all the partners to be 3 : 2 : 3.

The capitals of Runa and Ria, after taking into account all the terms of admission, were ₹ 61,625 and ₹ 25,375.

It is decided that the Capital Accounts of Runa and Ria be adjusted in the ratio of their respective share in the profits after admission, any surplus to be adjusted through the Current Account, while any deficiency through the Cash Account.

The surplus capital adjusted through the current account will be:

Options

• Ria’s debit capital balance of ₹ 2,625

• Runa’s credit capital balance of ₹ 2,625

• Ria’s debit capital balance of ₹ 19,625

• Runa’s credit capital balance of ₹ 19,625

Answer 1

Runa’s credit capital balance of ₹ 19,625

Explanation:

Determine the total capital of the new firm:

We estimate the total capital of the firm based on Uday’s capital contribution of ₹ 42,000 and his share of profits `3/8`

Total Capital of Firm = `42,000 xx 8/3`

= 1,12,000

Calculate the required capital for Runa and Ria based on the new profit-sharing ratio:

Runa’s Required Capital = `1,12,000 xx 3/8`

= 42,000

Ria’s Required Capital = `1,12,000 xx 2/8`

= 28,000

Runa’s Adjustment = 61,625 − 42,000

= 19,625 (Surplus)

Ria’s Adjustment = 25,375 − 28,000

= 2,625 (Deficiency)

The surplus capital adjusted through the current account will be Runa’s credit capital balance of ₹ 19,625.