Question

Soni and Kush were partners in a firm sharing profits and losses in the ratio of 4 : 5. Hitesh was admitted as a new partner for a 1/5^th share in the profits of the firm. After all adjustments regarding general reserve, goodwill, and gain on revaluation of assets and reassessment of liabilities, the balances in capital accounts of Soni and Kush were ₹ 7,00,000 and ₹ 13,00,000, respectively. Hitesh brought in proportionate capital for his 1/5th share in the profits of the firm. The amount of proportionate capital brought in by Hitesh was ______.

Options

• ₹ 25,00,000

• ₹ 20,00,000

• ₹ 5,00,000

• ₹ 10,00,000

Answer 1

Soni and Kush were partners in a firm sharing profits and losses in the ratio of 4 : 5. Hitesh was admitted as a new partner for a 1/5^th share in the profits of the firm. After all adjustments regarding general reserve, goodwill, and gain on revaluation of assets and reassessment of liabilities, the balances in capital accounts of Soni and Kush were ₹ 7,00,000 and ₹ 13,00,000, respectively. Hitesh brought in proportionate capital for his 1/5th share in the profits of the firm. The amount of proportionate capital brought in by Hitesh was ₹ 5,00,000.

Explanation:

1. Capital of Soni & Kush = 7,00,000 + 13,00,000

= 20,00,000

2. Share of Soni & Kush:

Remaining share = `1 − 1/5`

= `(5 - 1)/5`

= `4/5`

3. Total capital of the firm:

If `4/5` share is 20,00,000

Total capital = `20,00,000 xx 5/4`

= 25,00,000

Hitesh’s capital = `25,00,000 xx 1/5`

= 5,00,000