Question

Prateek, Charu, and Sirima were partners in a firm sharing profits in the ratio of 3:2:1. Prateek retired from the firm on 31\textsuperscript{st March, 2023. Charu and Sirima decided that the capital of the new firm will be ₹6,30,000. The capital accounts of Charu and Sirima after all adjustments on the date of retirement showed a credit balance of ₹4,35,000 and ₹1,89,000 respectively. Calculate the amount of actual cash to be brought into the firm or to be paid to the partners. Also pass necessary journal entries.}

Hint:

The capital adjustments in a partnership firm are made to align with the new profit-sharing ratio, ensuring the total capital is distributed proportionally.

Answer 1

Step 1: Calculate the total capital of Charu and Sirima in the new ratio. The new profit-sharing ratio between Charu and Sirima is 2:1. The total capital of the firm is ₹6,30,000. \[ \begin{array}{|l|r|l|r|} \hline \textbf{Particulars} & \textbf{Amount (₹)} & \textbf{Particulars} & \textbf{Amount (₹)} \\ \hline \text{Charu's Capital} & \frac{2}{3} \times ₹6,30,000 = ₹4,20,000 & \text{Sirima's Capital} & \frac{1}{3} \times ₹6,30,000 = ₹2,10,000 \\ \hline \end{array} \] Step 2: Adjust the current balances of Charu and Sirima. Charu's current capital is ₹4,35,000, which is ₹15,000 more than her required capital of ₹4,20,000. Therefore, Charu will withdraw ₹15,000. Sirima's current capital is ₹1,89,000, which is ₹21,000 less than her required capital of ₹2,10,000. Therefore, Sirima will bring in ₹21,000. \[ \begin{array}{|l|r|l|r|} \hline \textbf{Particulars} & \textbf{Amount (₹)} & \textbf{Particulars} & \textbf{Amount (₹)} \\ \hline \text{Charu's Excess Capital} & ₹15,000 & \text{Sirima's Deficit Capital} & ₹21,000 \\ \hline \end{array} \] Step 3: Journal Entries: \[ \begin{array}{|l|l|r|r|} \hline \textbf{Date} & \textbf{Particulars} & \textbf{Debit (₹)} & \textbf{Credit (₹)} \\ \hline 31^{\text{st}} \text{March, 2023} & \text{Charu's Capital A/c Dr.} & 15,000 & -- \\ & \text{To Bank A/c} & -- & 15,000 \\ & \text{(Being the excess capital withdrawn by Charu)} & & \\ \hline 31^{\text{st}} \text{March, 2023} & \text{Bank A/c Dr.} & 21,000 & -- \\ & \text{To Sirima's Capital A/c} & -- & 21,000 \\ & \text{(Being the deficit capital brought in by Sirima)} & & \\ \hline \end{array} \] Final Adjustment: Charu will withdraw ₹15,000.
Sirima will bring ₹21,000 into the firm.