Pinky, Qumar and Roopa partners in a firm sharing profits and losses in the ratio of 3:2:1. S is admitted as a new partner for 1/4 share in the profits of the firm, which he gets 1/8 from Pinky, and 1/16 each from Qumar and Roopa. The total capital of the new firm after Seema’s admission will be Rs. 2,40,000. Seema is required to bring in cash equal to 1/4 of the total capital of the new firm. The capitals of the old partners also have to be adjusted in proportion of their profit sharing ratio. The capitals of Pinky, Qumar and Roopa after all adjustments in respect of goodwill and revaluation of assets and liabilities have been made are Pinky Rs. 80,000, Qumar Rs. 30,000 and Roopa Rs. 20,000. Calculate the capitals of all the partners and record the necessary journal entries for doing adjustments in respect of capitals according to the agreement between the partners?
Calculation of New Profit Sharing Ratio:
Old Ratio of Pinky, Qumar and Roopa = 3:2:1
Seema acquires 1/4 share as follows:
- From Pinky: 1/8
- From Qumar: 1/16
- From Roopa: 1/16
New Share of Partners:
- Pinky = 3/6 - 1/8 = 4/8 - 1/8 = 3/8
- Qumar = 2/6 - 1/16 = 1/3 - 1/16 = 16/48 - 3/48 = 13/48
- Roopa = 1/6 - 1/16 = 8/48 - 3/48 = 5/48
- Seema = 1/4 = 12/48
New Profit Sharing Ratio = 18:13:5:12
Calculation of Required Capitals:
Total Capital of New Firm = Rs. 2,40,000
| Partner | Share | Required Capital |
|---|---|---|
| Pinky | 3/8 | 3/,40,000 = Rs. 90,000 |
| Qumar | 13/48 | 13/,40,000 = Rs. 65,000 |
| Roopa | 5/48 | 5/,40,000 = Rs. 25,000 |
| Seema | 1/4 | 1/,40,000 = Rs. 60,000 |
Adjustment of Capitals:
| Partner | Present Capital | Required Capital | Deficit/Surplus |
|---|---|---|---|
| Pinky | Rs. 80,000 | Rs. 90,000 | Bring Rs. 10,000 |
| Qumar | Rs. 30,000 | Rs. 65,000 | Bring Rs. 35,000 |
| Roopa | Rs. 20,000 | Rs. 25,000 | Bring Rs. 5,000 |
| Seema | - | Rs. 60,000 | Bring Rs. 60,000 |
Journal Entries:
| Date | Particulars | L.F. | Debit (Rs.) | Credit (Rs.) |
|---|---|---|---|---|
| Bank A/c Dr. | 60,000 | |||
| To Seema's Capital A/c | 60,000 | |||
| (Being capital brought by Seema) | ||||
| Bank A/c Dr. | 10,000 | |||
| To Pinky's Capital A/c | 10,000 | |||
| (Being deficiency of capital brought by Pinky) | ||||
| Bank A/c Dr. | 35,000 | |||
| To Qumar's Capital A/c | 35,000 | |||
| (Being deficiency of capital brought by Qumar) | ||||
| Bank A/c Dr. | 5,000 | |||
| To Roopa's Capital A/c | 5,000 | |||
| (Being deficiency of capital brought by Roopa) |
Explanation
This question tests the concept of adjustment of partners' capitals after admission of a new partner. The key steps involve: (1) calculating the new profit sharing ratio after deducting the sacrifice made by old partners, (2) determining the required capital of each partner based on their new profit share, and (3) comparing present capitals with required capitals to find the deficit or surplus. Since all old partners have present capitals less than their required capitals, they need to bring in the deficit amount in cash.
Solution Steps
Step 1: Calculate new profit sharing ratio by deducting shares given to Seema from old partners' shares
Step 2: Calculate required capital of each partner by multiplying their share with total capital
Step 3: Compare present capital with required capital for each partner
Step 4: Pass journal entries for bringing in deficit amounts by partners