Question

Asha, Deepa and Lata are partners in a firm sharing profits in the ratio of 3:2:1Deepa retires. After making all adjustments relating to revaluation, goodwill andaccumulated profit etc., the capital accounts of Asha and Lata showed a creditbalance of Rs. 1,60.000 and Rs. 80,000 respectively. It was decided to adjustthe capitals of Asha and Lata in their new profit sharing ratio. You are requiredto calculate the new capitals of the partners and record necessary journal entriesfor bringing in or withdrawal of the necessary amounts involved.​

Answer 1

Answer:

Explanation:

Calculation of new capitals of the existing partners

Balance in Asha’s Capital (after all adjustments) = 1,60,000

Balance in Lata’s Capital = 80,000

Total Capital of the New Firm = 2,40,000

Based on the new profit sharing ratio of 3:1

Asha’s New Capital = Rs. 2,40,000 ×34 = 1,80,000

Lata's New Capital = Rs. 2,40,000 ×14 = 60,000

Note :The total capital of the new firm is based on the sum of the balance in the capital accounts of the continuing partners.

b. Calculation of cash to be brought in or withdrawn by the continuing partners :

Asha Lata

                                                       (Rs.)                                    (Rs.)

New Capital                                 1,80,000                            60,000

Existing Capitals                           1,60,000                         80,0000

c. Cash to be brought in on (paid off)  20,000                       20,000

                                 Journal entries                                                            

Cash A/c                          20000

   To  Asha Capital                                20000

Lata's Capital A/c          20000

  To Cash A/c                                         20000