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
 
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

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