Sandeep, Praveen and Tara are partners sharing profits in the ratio 3:2:1. On 1st April 2014 Sandeep gave a notice to retire from the firm. Praveen and Tara decided to share future profits in the ratio 2:3. The capital accounts of Praveen and Tara after all adjustments showed a balance of `64,000 and `1, 00,000 respectively. The total amount to be paid to Sandeep was `1, 23,000. This amount was to be paid by Praveen and Tara 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 workings clearly.
Dear Student
Regards
| Journal | ||||
| Date | Particulars | Debit | Credit | |
| Cash A/c | Dr. | 123,000 | ||
| To Praveen's Capital A/c | 50,800 | |||
| To Tara's Capital A/c | 72,200 | |||
| (Being cash brought in) | ||||
| Sandeep's Capital A/c | Dr. | 123,000 | ||
| To Cash A/c | 123,000 | |||
| (Being paid to sandeep on retirement) | ||||
| Adjustment Of Capital | ||
| Total Capital of new Firm = Capital of Praveen + Capital of Tara + Amt to be paid to Sandeep | 64,000 + 1,00,000 + 1,23,000 | 287,000 |
| Praveen's share of Capital | 2,87,000 x 2/5 | 114,800 |
| Existing Capital of Praveen after all adjustments | 64,000 | |
| Amt brought in by Praveen | 1,14,800 - 64,000 | 50,800 |
| Tara's share of Capital | 2,87,000 x 3/5 | 172,200 |
| Existing Capital of Tara after all adjustments | 100,000 | |
| Amt brought in by Tara | 1,72,200 - 1,00,000 | 72,200 |
Regards