Question

X and Y were partners in a firm. They admitted Z as a new partner for 20% share in the profits. After all adjustments regarding general reserve, Goodwill, gain or loss on revaluation, the balances in capital accounts of X and Y were ₹2,50,000 and ₹3,50,000 respectively. Z brought proportionate capital so as to give him 20% share in the profits. Calculate the amount of capital to be brought by Z.

Hint:

When admitting a new partner, their capital is calculated based on the total capital of the existing partners and their share in the profits.

Answer 1

Step 1: Understand the situation.
X and Y's combined capital is: \[ 2,50,000 + 3,50,000 = 6,00,000 \] Z is to have a 20% share in the profits. Therefore, Z’s share of the total capital should be 20% of ₹6,00,000, which is: \[ \text{Z’s capital} = 0.20 \times 6,00,000 = 1,20,000 \] Step 2: Conclusion.
Z needs to bring ₹1,20,000 as capital to maintain a 20% share in the firm’s profits.